Oil continued to decline on Monday showing little response to comments from Iran and also a new OPEC report. Oil is trading in the red at 44.25 down by 37
Oil gave back gains acquired after US House of Representatives nominally voted down an Iran nuclear deal that would subsequently open up Iran’s oil exports. The short-lived advances were echoed by a second-week of falling rig count and EIA’s projection of non-OPEC output cuts due to low prices. Nevertheless, President Obama has enough support with the Senate’s backing to veto this verdict when the matter goes to Congress later this week, coincidental to Federal Reserve’s rate meeting. Oil remains weak on the downside before this date, with even more losses in store if an approval is finally reached.
OPEC has given the clearest signal yet that it believes it is winning its oil price war with the US shale industry. The group of 12 mainly Middle Eastern producers has said that output from outside the cartel in 2016 will be over 100,000 barrels per day (bpd) lower than it had previously predicted, as lower prices shut down more production.
In its closely-watched monthly market report, OPEC claimed: “There are signs that US production has started to respond to reduced investment and activity. Indeed, all eyes are on how quickly US production falls.”
Oil prices fell on Monday as weaker-than-expected Chinese data weighed on markets, adding to concerns that declining global demand would exacerbate a surplus of crude. Traders are also waiting to see whether the U.S. central bank raises interest rates for the first time in nearly a decade later this week. Should interest rates rise, analysts expect oil to fall as a stronger dollar would undermine demand from importing countries.
Oil prices have fallen almost 60 percent since June 2014 on the back of the largest global surplus in modern times and concerns about a slowing Chinese economy.
The US Energy Information Agency (EIA) reported that August production fell by 140,000 BPD compared with July production, and the total US production likely will average 9.2-M BPD this year and 8.8-M BPD in Y 2016.
The International Energy Agency (IEA) Friday said that US production from onshore shale Oil plays could fall by 400,000 BPD next year, which will be partially offset by higher production from the Gulf of Mexico, netting out at a decline of 180,000 BPD.
The number of rigs drilling for Crude Oil in the US is down by 940 Y-Y and down by 10 W-W. The Nat Gas rig count fell by 6 from 202 to 196. The count for Nat Gas rigs is down by 142 Y-Y. Gasoline stockpiles increased by 400,000 bbls last week.