Oil analysts expect the price of crude to rise steadily this year but remain in a tight band dictated by USA shale output growth on one side and OPEC supply restraint on the other, a poll showed on Wednesday. Observers have noted that should the US exceed these production levels, it could potentially overtake Saudi Arabia and Russian Federation to become the world's top crude oil producer.
"We got a little extended on the upside - we had a price advance of more than $6 a barrel in crude in less than two weeks", said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates.
By 1:12 p.m. Eastern time (1812 GMT), Brent was down 67 cents to $66.83 a barrel, while U.S. West Texas Intermediate crude CLc1 fell 72 cents to $63.18.
The growing U.S. production is reversing global markets at a time when other major producers, including Russian Federation and the Organization of Petroleum Exporting Countries (OPEC), are shrinking their production to support prices.
The Energy Minister of the United Arab Emirates and key figure in the Organisation of Petroleum Exporting Countries (OPEC), Suhail Al-Mazrouei, on Tuesday revealed that he expects the global oil market to be balanced this year, as producers continue to trim production following a 2014 market crash. Brent crude futures for the most active May contract were down 84 cents at $65.68 a barrel.
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He said, "The annual production of crude oil in months from January to March will be below the output caps exporting less than 7 million barrels per day". Gasoline stocks rose by 1.9 million barrels. Higher U.S. oil exports-including to China and a historic first to the Middle East-are upending the global oil flows and eating away at the market shares of Saudi Arabia and Russian Federation.
The stronger dollar makes commodities denominated in the US currency more expensive for holders of other currencies. However, inventories are forecast to have risen by 2.7 million barrels last week, a preliminary Reuters poll showed on Monday.
Even if the demand for oil increases (if you subscribe to the theory that states the global economy is witnessing robust growth), the supply side will flood the oil market, and it could have an adverse effect on oil prices.
Oil fell more than 1 percent on Thursday, hitting two-week lows on pressure from a strong dollar and worries that surging USA crude output might thwart OPEC's efforts to drain global supply. FRX/ A strong dollar makes oil more expensive for buyers using other currencies.
Prices were pressured earlier after three of the world's top consumers of crude - China, India and Japan - reported a slowdown in monthly factory activity.