Crude oil price rose by around three per cent Tuesday, a day after United States oil producer Anadarko said it would cut capital spending plans and Saudi Arabia vowed to reduce crude oil exports to help curb global oversupply.
The global benchmark, brent crude futures, rose $1.37 or 2.8 per cent to $49.97 a barrel, while the US West Texas Intermediate futures rose $1.39 or 3 per cent to $47.73 a barrel.
Lower oil prices in June and July may be affecting US shale production, Reuters quoted Mark Watkins, regional investment manager at US Bank as saying.
“Companies are not drilling as fast they had been in the beginning of 2017. They are not producing as much because it’s much less profitable with prices in the low $40s,” Watkins said.
Last Monday, Anadarko Petroleum Corp posted a larger-than-expected quarterly loss and said it would cut its 2017 capital budget by $300 million because of depressed oil prices, the first major U.S. oil producer to do so.
Earlier, Halliburton’s executive chairman said growth in North America’s rig count was “showing signs of plateauing.
“In the US, investors have been waiting to see where that top is in oil production.” “We’ve hit a tension point,” Watkins added
At a meeting of the Organiation of the Petroleum Exporting Countries (OPEC) and non-OPEC producers last Monday in St. Petersburg, Russia, Saudi Arabian Energy Minister, Khalid al-Falih, said his country would limit crude oil exports to 6.6 million bpd in August, down almost 1 million bpd from a year earlier.
Nigeria agreed to join the deal boy capping or cutting its output from 1.8 million bpd once it stabilises at that level.
OPEC said stocks held by industrial nations had fallen by 90 million barrels in the first six months of the year but were still 250 million barrels above the five-year average, which is the target level for OPEC and non-OPEC members.
The Joint OPEC and Non-OPEC Ministerial Monitoring Committee (JMMC) had at its fourth meeting in Russia, last Monday approved the decision of the federal government to cap Nigeria’s oil production at a sustainable volume of 1.8 million barrels per day (mbpd).
The meeting reviewed the June 2017 report, and also listened to the presentations made by the representatives of Libya and Nigeria on their production recovery plans, prospects and challenges.
OPEC and non-OPEC producers led by Russia had agreed to cut oil output by a combined 1.8 million barrels per day from January 2017 until the end of March 2018.
However, Libya and Nigeria were exempt from the production cap to help their production to recover from destructions caused by internal strife.
But in a communiqué issued at the end of last Monday’s meeting, hosted by the Russian Federation, the JMMC said it welcomed the flexibility of Nigeria in this regard, “which despite its commitment to recover its pre-crisis production level, voluntarily agreed to implement similar OPEC production adjustments as soon as its recovery reaches a sustainable production volume of 1.8 million barrels per day.”