On Tuesday, oil closed lower after it was reported that shale output in the U.S. had increased substantially. The OPEC deal continues to gain traction for the oil market. Forecast shows that there may be another surprise fall in the next stockpile report. WTI crude oil closed lower by 0.24 cents to $52.14. Brent crude oil closed lower by 0.26 cents to $55.10 per barrel.
Shale Output Rising
There already is a large widespread oil glut around the globe. The problem is that the amount of stockpiles produced must drop to sustain prices. The big issue is that shale output has increased substantially over the years. The reason being is that more oilrigs have been coming online, because the price of oil has hovered around $50 per barrel.
The Energy Information Administration — EIA — reported that May would shape up to be the biggest shale output in over two years. The U.S. Government expects shale output to rise to 5.19 million barrels per day — bpd.
Shale output in the U.S. has been steady lately, but a boost in production in one region could be the reason for the added stockpiles. This region is known as the Permian Basin, which is located in Texas. The EIA forecasts that the Permian Basin could reach record production of 2.36 million barrels per day — bpd.
That expected output is what spooked the oil market. A boost in output over normal production levels leaves additional supply. With demand lacking greatly, that would cause oil prices trade down.
Reduction on Track
What has really helped oil stay in its current trading range would be the OPEC output cuts. In the beginning of this year, OPEC had established a deal in which most nations would curb oil output. The total reduced amount for output was established as being 1.8 million barrels per day.
This was done to boost oil prices, and make sure that supplies remain suppressed. The only reason that oil prices have been doing so well is because all the pledged countries have stuck to their agreed upon cuts.
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