Jan. 18 (UPI) — An expected rebound in North American oil activity offset reported declines elsewhere to send crude oil prices sharply lower early Wednesday.
Crude oil is in the middle of a week of high volatility, characterized by sharp declines after Saudi Arabia pulled in the reins on a multilateral production deal, only to be followed by sentiment that the same production deal was having the desired impact.
The Organization of Petroleum Exporting Countries agreed to limit production to 32.5 million barrels per day as of Jan. 1. The move was intended to erase the glut of oil on the market that caused a dramatic sector-wide downturn last year.
OPEC in its latest monthly market report said its 13 members combined for 33.08 million bpd in December, a contraction of 220,000 bpd from the previous month. Several OPEC members started January with confirmation of compliance to the agreement, though production cuts and the corresponding rise in crude oil prices brought some North American operators in from the sidelines.
OPEC raised its total U.S. production estimate for the year because of a rebound in exploration and production activity.
“The forecast for 2017 non-OPEC supply also depends on how much U.S. tight oil production improves in the coming months,” OPEC’s report read. “Most sources anticipate a rebound in shale oil output next year, supported by the recovery in oil prices and the remarkable spending.”
A rise in U.S. oil production from inland shale basins pushed markets heavily toward the supply side last year, contributing to the sharp decline in crude oil prices. About an hour before start of trading in New York, the price for Brent crude oil declined 1.4 percent in response to OPEC’s report to $54.70 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, was off 1.4 percent from the previous close to $51.73 per barrel.
The U.S. situation was mirrored in Canada, where exploration and production activity has shown substantial growth since wildfires in May sidelined much of the nation’s total oil production. Elsewhere, OPEC said growth was coming from Norway and Russia. Russia is party to a non-OPEC commitment to curb output and OPEC said production at the tail end of last year was “more or less stagnant.”
