Oil market overview
Oil prices dropped to $51.10 after Baker Hughes total US rig count posted an increase in total rigs and Saudi Arabia Energy minister Al-Falih said the country will no longer tolerate the loss of its market share.
US drillers added 14 oil rigs according to the data we received on March 17, bringing the total count up to 631. Growing US shale production fed concerns that an output cut deal propelled by the OPEC-members and supported by large oil suppliers is having less impact than it was expected.
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Another headwind for oil prices was the news that Libya’s National Oil Corporation is going to regain its control over key oil ports (from Reuters report). This should boost the country’s oil export. Libya is not a contracting party of the production cut deal forged in November. So, market analysts believe that higher output in Libya will be an additional drag on the oil futures.
Some analysts, however, expect the oil prices to rise higher as they believe that cuts in OPEC production will start to show up only between the mi-March and mid-April. A sharp reduction of oil imports is expected, it will inevitably lead to impressive crude inventory draws. The mix of falling imports and shrinking stockpiles of oil should send the oil price to the upside.
