US oil producers’ cuts down fast

As per the latest data, crude oil production in US is surging and reached the peak over 9 million barrels/day. This has kept the prices depressed amid a breakdown in OPEC cartel cooperation.

Nevertheless worth noting-

• Latest activity is showing that the rig count is falling fast. According to Baker Hughes the rig count has fallen to 1019.

• Recent month's fall in oil rigs close to record. So far as the total production remained elevated, it had no impact on price.

• US EIA still expects the production to rise to 9.42 million barrels/day by May, 2015.

• If the total production starts falling it might start to affect the crude oil spreads, if not price.

• Shale oil production is easy to shut off in the time of adversity than its conventional counterparts.

• Global oil production is still not expected to decline as countries are engaged in a war for market share. Recently Algerian Premiere is trotting the globe to find support for cooperation, but little could be found from a stubborn Russia & Saudi Arabia.

• Another vital sign is that producers are paying fees to break away from some of the production contracts.

Oil is expected to maintain bearish bias, though whipsaw in price & volatility may rise. Brent oil is trading at $ 58.9/ barrel, down near 2% for the day and with a near $10 spread over WTI.