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Oil Prices Slip on Higher US Output Offsetting OPEC Cuts

February 28, 2017 at 17:37 by Andrew Moran

Oil prices are sliding on Tuesday as higher US crude output is offsetting the cuts made by Organization of Petroleum Exporting Countries (OPEC) members. Despite OPEC nations reaching near full compliance with the November agreement, higher production from US oil firms is putting pressure on prices.

April West Texas Intermediate (WTI) crude futures slipped $0.72, or 1.33%, to $53.33 per barrel at 16:10 GMT on Tuesday on the New York Mercantile Exchange. US crude is set to record a monthly increase of approximately 1.3%, the smallest monthly gain since February 2016.

Brent, the international benchmark for oil prices, is also falling. April Brent crude futures tumbled $0.58, or 1.04%, to $55.35 a barrel on London’s ICE Futures exchange. Brent crude will post a 0.1% decline for February.

Oil prices are decreasing on Tuesday because of the greater oil production levels from US producers. Although OPEC countries have been able to slash production by roughly 1.8 million barrels per day (bpd) in order to keep prices above $50, US companies are ramping up output to take advantage of the prices. Even Russia is pitching in as it cut production by 124,000 bpd in February compared to October levels.

A survey of analysts by S&P Global Platts projects that crude stockpiles will see an increase of 2.1 million barrels. The Energy Information Administration (EIA) will release the official numbers on Wednesday, but if the forecasts are correct then it would be the eighth consecutive week of rising crude supplies. The survey also expects a drop of 1.7 million barrels in gasoline stocks and a decrease of 700,000 barrels in distillates.

Reports suggest that Saudi Arabia wants crude prices to jump to $60 per barrel sometime this year. A Reuters poll released on Tuesday shows economists estimating an average 2017 Brent price of $57.52 a barrel. Moreover, a World Bank report published in January pegs the average price of oil to be $55.

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