Prices of crude oil slipped during early trading on Friday as an appearing surge in Middle East output may pull on the stronger markets predicted in April, but dropping United States production and a slumping greenback are still giving support.
In London, internationally traded benchmark Brent crude futures tacked on $47.92 per barrel, declining 22 cents from their last settlement.
On the New York Mercantile Exchange, United States West Texas Intermediate dropped 18 cents at $45.85 per barrel.
Both contracts were close to 2016 peaks of Brent’s $48.19 and WTI’s $46.14 per barrel. West Texas Intermediate’s slighter plunge was due to a falling United States crude output.
Despite Friday’s lows, Brent and West Texas Intermediate gained almost 3 a third from April troughs and are over 75 percent higher than their 2016 lows, elevated by sinking output and a lower greenback, which has tumbled almost 6 percent against rival major currencies.
However, an analyst said that an appearing surge in production by members of the Organization of the Petroleum Exporting Countries, with jumping Iranian output and following blackouts in Iraq, Nigeria, and the United Arab of Emirates, could cap recent crude price hikes.
According to a market analyst, “A sustainable rise in OPEC production may be just around the corner, and ... the rally may pause. Maintenance in the UAE at fields ... is scheduled to end in April, implying a rise from current production of 2.73 million barrels per day (bpd) to the previous 2.91 million bpd production rate in May.”
For 2017, market analysts forecasted it to be approximately 33.1 million barrels per day, stating, “With upside risks originating from Libya and Saudi Arabia, and downside risks from unplanned outages and spending cuts in Iraq.”
One of the main outcomes of the global oil price retreat between 2014 and 2016 has been a deep economic crisis in crude export reliant Venezuela, where political risk consultancy Eurasia Group noted that the government faces default as the state runs out of funds to keep the oil pumps running.
As stated by Eurasia Group, “The government needs to invest about $15 billion per year to maintain current production (2.4 million bpd), and mounting problems will probably lead to a decline of 100,000–150,000 bpd this year.”
“Barring a meaningful recovery in oil prices or fresh loans from China in the second half of the year, scarce foreign exchange will probably force the state to default later this year, most likely in the fourth quarter.”