Crude oil trading remains volatile on Thursday, hardly finding a single direction, as record US production has raised concerns for a return to global oversupply, and OPEC is pushing for a downward trend in production.
In the beginning of the Thursday trading session the US crude oil WTI with delivery in December rose by 0.28% to 61.84 USD per barrel. The Brent oil increased by 0.28% to 72.27 USD per barrel.
Part of the oil exporting producer (OPEC), along with Russia, decided in June to loosen production constraints after pressure from US President Donald Trump to reduce prices and offset the shrinking supplies from Iran.
But even with sanctions against Iran, OPEC might also keep cuts. The OPEC and Russia could use the contraction to keep the oil price at about 70 USD per barrel. The imposition of sanctions against Iran at the beginning of the week failed to bring an upward trend to the market, as eight countries were able to continue buying oil from the country for up to six months.
There is a steady increase in crude oil production in the United States, which reaches a record 11.6 million barrels per day in the week ending November 2, according to data from the Energy Information Administration (EIA). Only 2018 growth in oil production is 22.2%. This makes the US the world’s largest oil producer.
The Energy Information Administration even expects production to reach 12 million barrels by the middle of 2019 thanks mainly to increased production of shale oil. Meanwhile, crude oil inventories in the US surprisingly rose by 5.8 million barrels to 431.79 million barrels in the week ending November 2. This is twice as much as expected.
Crude oil inventories are again above their five-year average in October.
Production, however, has grown not only in the US, but also in many other countries, including Russia, Saudi Arabia, Iraq and Brazil, which raises fears of oversupply, similar to what lowered the prices of oil between 2014 and 2017.
On the commodity markets, gold went down by 0.33% to 1,224.70 USD per barrel on Thursday due to the slight strengthening of the dollar awaiting the Federal Reserve’s decision later today. Market participants will be tracking what signals will be available for possible interest rate increases in December and 2019. Higher US interest rates support the dollar and raise yields on bonds, making gold less attractive for investment.
The dollar index, which tracks the strength of US dollars against a basket of six major currencies, rose by 0.05% to 96.21 points.