Oil prices plummet amidst increasing U.S. drilling activity and steady OPEC supply

Oil prices plummet amidst increasing U.S. drilling activity and steady OPEC supply

"We can't do what we did in the '80s and '90s by swinging millions of barrels in response to market conditions", he said.

After seeing a few days of plummeting oil prices, we are, once again, on the mend.

The prospect of higher output from Libya, which is exempt from the deal, is adding further bearish sentiment. Prices last week gained 0.8 percent to end at $51.76.

Saudi's demand for oil products declined to 1.959 million bpd in January to from 2.21 million bpd the month before.

There is also disparity between official Opec supply data and secondary source data which makes it hard to gauge the extent of supply cuts. For the second half, the situation will be much more dependent on what OPEC and some non-OPEC nations chose to do. The Libyan government regained control of two key oil ports, Es Sider and Ras Lanuf, which can export up to 600,000 barrels per day. Brazil is not a part of the non-Opec group that agreed to production cuts.

However, most of the investors that had expected oil prices to book decent gains in response to the output cuts would have had their hopes dashed in the last couple of weeks. The forecast was based on the expectation that oil traders would continue to reduce their net long positions. The U.S. shale oil drillers have used higher prices to add new rigs for the past eight weeks in a row. The first quarter of the year is a low-demand period. For that month, global oil supplies were higher to the tune of 0.26 million barrels per day but a lot of this appears to have been seasonal in nature. One OPEC source said shale production was expected to grow by about 300,000 bpd this year - a level the market could accommodate.

Benchmark palm oil futures for June delivery on the Bursa Malaysia Derivatives Exchange were down 0.3 percent at 2,795 ringgit ($630.71) a tonne at the midday break. "This fuels concerns that the Trump administration may upend worldwide trade norms, hurting global growth".

What happens next is uncertain. EIA forecasts show that United States 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. "They will more likely opt for income and will push to get help from non-OPEC". On the other hand, if prices remain low, OPEC only stands to lose market share to its competitors by continuing the production cuts. So bunker prices may stay rather volatile and continue to demonstrate irregular changes.

We do not expect that the situation on the bunker market will clear up next week too much.