Investing.com – prices fell in Asia on Monday amid some expected profit taking on the OPEC-led output curb extension that was widely welcomed by the market as the market looks ahead to seasonal demand changes as winter gets underway in the Northern Hemisphere.
futures, the benchmark for oil prices outside the U.S., fell 0.50% to $63.30 a barrel. U.S. West Texas Intermediate (WTI) crude futures dipped 0.81% to $57.89.
“At face value, the normalized inventory target remains bullish relative to our expectations with a target of 5-year average inventory levels which does not take into account rising demand or infrastructure oil, ” Goldman Sachs (NYSE:) said in a client note.
Last week, oil finished higher on Friday, with prices climbing back toward their best level since July 2015 after OPEC and other crude producers agreed to extend existing output cuts until the end of 2018 to tighten global supplies.
The Organization of Petroleum Exporting Countries (OPEC), along with some non-OPEC producers led by Russia, agreed on Thursday to extend current oil output cuts for a further nine months until the end of next year, as expected.
They also signaled a possible early exit from the deal should the market overheat and prices rise too far.
The deal to cut oil output by 1.8 million barrels a day (bpd) was adopted last winter by OPEC, Russia and nine other global producers. The agreement was due to end in March 2018, having already been extended once.
The OPEC-led production cuts have been one of the key catalyst supporting the recent rally in oil prices amid expectations that rebalancing in crude markets are well underway.
However, fears that rising U.S. output would dampen OPEC’s efforts to rid the market of excess supplies are prevented prices from rising much further, according to market participants.
U.S. energy companies added two oil rigs in the week to Dec. 1, bringing the total count up to 749, the highest since September, General Electric (NYSE:)’s Baker Hughes energy services firm said in its closely followed report on Friday.
Domestic U.S. output has rebounded by almost 15% since the most recent low in mid-2016, and increasing drilling activity for new production means output is expected to grow further, as producers are attracted by climbing prices.
U.S. oil production hit a new record of 9.68 million bpd last week, according to government data released during the week, bringing U.S. output close to levels of top producers Russia and Saudi Arabia.
On the demand side, Senate Republicans narrowly passed a bill to overhaul the U.S. tax system in the wee hours of Saturday. The GOP still needs to overcome significant differences for the House and Senate to craft a joint bill in a process called resolution and send it to Trump’s desk. Republicans hope to reach a deal by Christmas.
Goldman Sachs said the Senate version led it to revise growth forecasts.
“We have increased our estimate of the growth effects of the legislation slightly, to around 0.3pp in 2018 and 2019,” Goldman said in a note to clients.
“This reflects the slightly larger amount of tax cuts in the Senate plan following revisions, and our expectations regarding the eventual compromise.”
Elsewhere, ABC News reported on Friday that Michael Flynn, the former White House national security advisor, would testify that he was directed to make contact with Russians during the presidential campaign in 2016. Flynn pleaded guilty to lying to the FBI about his post-election contacts with Russia’s ambassador to the U.S.
The ABC report was later corrected the story to say its source had clarified that Trump gave Flynn the directive “shortly after the election” to discuss strategies for fighting the Islamic State extremist group.
Source: Investing.com
