Oil drops as OPEC loses control of narrative

Oil slid below US$45 a barrel for the first time since OPEC agreed to cut output in November previous year, as U.S. shale confounds the producer group's attempts to prop up prices. Gulf producers need money to balance the budget. Once that gave way, a key Fibonacci retracement and the low of the year were on the horizon, before paving the way to $45 a barrel. Analysts have struggled to explain the demand drop-off, but they point to the fact that gasoline prices are up from early 2016's very low levels and that new cars continue to guzzle less gas.

Nearly three years into the oil slump, the kingdom still needs US$83 crude to balance its budget, according to the International Monetary Fund. "There are whispers and rumors out there that the deal won't even get extended", John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone.

"If the cut by OPEC and Russian Federation was offset by increased production in the U.S., the net effect will be nullified although demand increase will still help to balance the market", Xiaoyi Mu said.

In other news, the USA oil drilling rig count rose by 6 rigs to a total of 703 operating in American fields, marking the 16 straight week of increases, according to Baker Hughes.

Members of the OPEC have achieved historically high compliance with a deal to cut their combined production by 1.2 million barrels a day. USA production is at its highest since August 2015.

The decline is being driven by expanding U.S. output before OPEC is set to decide whether to prolong its cuts.

Egyptian woman leaves Indian hospital more than 300 kg lighter
Abd El Aty was put on a special liquid diet in India to reduce her weight enough so that doctors could perform bariatric surgery. The minister yesterday instructed officials to prepare a note in this regard so that it could be issued to all hospitals.

Investors appear to have firmly accepted that OPEC will continue to curb its output levels, which analysts say has unduly caused them to become fixated on US shale production. Stockpiles still stand at a near-record 527.8 million barrels and well above the five-year range.

For such companies, multiple signs of a trend change were clear this week: a nose-dive in Chinese iron ore futures, big losses in gold and copper prices and persistently high oil inventories that spooked crude oil traders. "This lack of faith seems to have dawned on the market", Smith said.

Grisanti expects oil to average between $50 to $55 this summer.

Higher prices for oil for future delivery than spot prices-a situation known as contango-tends to encourage crude participants to store oil with the expectation of selling the commodity in the future. Production there has been stronger than expected. "While drilling has been strong, we have yet to see the same level of activity in completing wells, which will limit the aggressiveness of growth".

While the cartel's kingpin Saudi Arabia is disappointed prices are below the target, OPEC regards the agreement as positive for the market and wants to extend it. They jumped to about 24.3 million barrels a day in January, the month the deal was implemented. "We expect North American supplies to grow 600,000 barrels a day year-on-year in Q2, but this is offset by fall in supplies elsewhere in non-OPEC".

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