The price of Brent crude dipped on Monday June 4 to $75.53 a barrel before recovering most of its losses to trade at over $76 a barrel by lunchtime in the UK. The move was believed to be triggered by latest monthly data released by the US Energy Information Administration (EIA) last week.
In its latest data, the EIA has US oil production running at a new record of
10.47 million barrels per day (bpd) in March as US producers like ExxonMobil, the maker of Mobil DTE 10 Excel 32, continue to make efficiency gains. Two new rigs were also added in the previous week, meaning that there are 861 oilrigs now in operation.
The pace of US production growth is putting some traders off from betting on increasing oil prices. Speaking to Reuters, an analyst at London brokerage PVM Oil Associates, Stephen Brennock, described it as follows:
“A sea of red is washing over the energy complex as rising U.S. production coupled with a looming relaxation in OPEC-led cuts sends bulls scurrying for the exits.”
There have also been signals from OPEC and its partners about a possible relaxation of its production curbs. Russia’s largest oil company, Rosneft, recently disclosed that it is already testing production increases.
On the other hand, concerns over future Iranian and Venezuelan oil production continue to support the current oil price, even though there is a general feeling that the oil rally has gone too far and risks overheating the market.