March 21 (UPI) — Under broader pressure from the so-called Brexit, crude oil prices moved lower early Monday on a hangover from higher U.S. exploration and production work.
Energy companies working in shale oil basins in the United States have adapted to lower price points so that, once the market does recover, they’re more efficient at returning to work. After forecasting production declines for 2017, U.S. federal data instead show steady gains, and production so far in March has been at around 9 million barrels per day.
Data last week from oilfield services company Baker Hughes showed an increase in the number of rigs deployed in the United States for the ninth week in a row. Rig counts serve as a rough estimate of exploration and production, which in itself is indicative of energy sector spending and confidence.
Gains in production from the United States, and producers from the Organization of Petroleum Exporting Countries eager to defend a market share, pushed oil to historic lows last year. OPEC in November agreed to manage collective production, leaving the United States in a unique position to influence crude oil prices.
With Baker Hughes data still a factor in trading, the price for Brent crude oil was down 1.3 percent from Friday’s close to $51.09 per barrel about a half hour before the start of trading in New York. The U.S. benchmark for the price of oil, West Texas Intermediate, was off 1.7 percent from the previous close to $47.94 per barrel.
For the broader economy, concerns could emerge from the British decision to invoke Article 50 of the Lisbon Treaty next week, triggering the official start of negotiations to leave the European Union.
“We are on the threshold of the most important negotiation for this country for a generation,” British envoy to the EU Tim Barrow said in a statement. “The government is clear in its aims: a deal that works for every nation and region of the U.K. and indeed for all of Europe.”
Any Brexit factor may be a knee-jerk reaction. The referendum to leave the EU sent shockwaves through the global economy last year, putting downward pressure on oil prices that had already touched historic lows in 2016. By November, however, the Bank of England said overall economic sentiments improved as some of the Brexit concerns became factored into the global market.
Broader European issues may balance any negative headwinds from Article 50 after a victory for Dutch Prime Minister Mark Rutte signaled the rising sentiment of populism was waning in Europe. Tamas Varge with broker PVM said in a daily newsletter the win for the Rutte’s center-right party could be seen as a sign the EU remains largely intact and one could “conclude that the impressive rally in European stock markets is supportive if anything for regional oil demand, therefore oil should follow upbeat European shares.”