FxWirePro: Oil price declines as US production recovers

The latest numbers from Energy Information Administration (EIA) of the United States show that the decline in production that has been proving some support to the oil price was a temporary phenomenon. Last week’s report showed that since topping in early June, production in the United States declined by 100,000 barrels per day to 9.25 million barrels per day. The decline in production coupled with a drop in the numbers of operating oil rigs in the United States provided hopes to the bulls that US production might be struggling to cope with a price below $50 per barrel (Brent).

However, it has now been proved that the hope was short-lived. Last night’s EIA report showed that production recovered to 9.34 million barrels per day. So far in 2017, the production has increased by 641,000 barrels per day. International Energy Agency has forecasted an increase in the oil production in the United States in tune of 920,000 barrels per day in 2017 and another 780,000 per barrels increase in 2018.

Despite a decline in the inventory about 6.3 million barrels, the oil price gave up earlier gains made on the day and declined from $46.5 per barrel to $45.3 per barrel at closing. In today’s trading, the decline is continuing and WTI is currently trading at $44.4 per barrel, lower than the Monday’s low at $44.5 per barrel.

Active Call: We recommended adding short positions yesterday to our existing short call with a target of $38 per barrel.

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