Oil prices below $50 amid record US supplies
By Kamen Parushev - Research Analyst
Last week oil prices slumped below $50 for the first time since the beginning of December 2016, despite the efforts of the Organisation of Petroleum Exporting Countries (OPEC) to curb crude production. After months of relative prices stability, with oil prices pinned between $50 and $55, last Friday (10 March) OPEC basket price was down $1, or 2%, at $49.81, its lowest since 1 December. Other benchmark prices, such as Brent and West Texas Intermediate (WTI), also followed a similar trend. Brent lost 8.4% since last Monday closing at $51.35 at the beginning of this week. During the same period WTI, the US benchmark, fell $4.8 a barrel (9% drop) to $48.4.
Since mid-2014 crude oil prices and production has been one of the most closely followed topics worldwide. The increased global supply, accompanied by sluggish economic growth in developed countries, and therefore decelerated oil demand, resulted in free falling oil prices.
In November, OPEC member countries, estimated to hold about 80% of world’s proven oil reserves, and other oil-producing nations agreed to lower their output for much of 2017 to rein in chronic oversupply and to boost prices. As a consequence, the total oil production of the OPEC states contracted by 1.5 million barrels per day between November 2016 and February this year. Thus, OPEC’s output fell below 32 million barrels per day for the first time since September 2015.
Drilling and stockpiles of oil have continued to rise however, particularly in the United States, where crude oil inventories hit a new all-time high. According to the latest weekly status report from the Department of Energy, U.S. domestic oil production rebounded to within 5% of last year's record to nearly 9.1 million barrels per day.