US oil production has risen to over 9.1 million barrels per day from below 8.5 million barrels per day last June.
Brent crude oil futures rose 0.02 dollar or 0.04 percent to close at USD 51.76 a barrel at NYMEX. While the compliance to output cuts has been almost 100 per cent from the Opec side, relative non-compliance of Non-Opec coupled with steadily climbing United States production is keeping prices under pressure. Russian Federation and 10 other non-OPEC producers agreed to cut half as much.
With few signs that producers will cut supplies deeply enough to end the glut, and indicators that output is rising in the USA, traders say only strong demand can eventually rein in the surplus. Saudi Arabia is ready to extend cuts if supplies stay above the five-year average, Energy Minister Khalid Al-Falih said in an interview on Bloomberg Television last week. "A major threat to the market, whether a BAT or simple tariffs are enforced, could arise from diminished oil and product demand as protectionist policies are sure to weigh on economic growth".
Looking ahead, nimble USA oil companies seem likely to keep raising output, even if oil prices remain near today's level.
OPEC oil producers increasingly favour extending beyond June a pact on reducing crude supply to balance the market, sources within the group said, although Russian Federation and other non-members need to remain part of the initiative. EIA forecasts show that USA shale oil production is expected to rise again in April by 109,000 bpd to 4.96 million bpd suggesting that shale is surely making a comeback at this level of oil prices.
"The combination of falling imports and stronger crude runs should lead to substantial inventory cuts over the coming months", they said. That's because even the relatively modest oil price recovery of the past year is driving a quick rebound in US oil production. If market balancing indeed has to start, we need to see a sustained drawdown in oil stockpiles.
"Hedge selling from producers and long-liquidation from funds is a bearish cocktail", said Ole Hansen, Saxo Bank's head of commodity strategy.