By Barani Krishnan
Investing.com – The question of what the United States will abandon as its first agreed drop in oil production dominated crude trade on Wednesday, with prices rising nearly 2% over industry output declines government energy.
Crude oil production in the United States is reported to have dropped to 12.4 million bpd last week, compared to 13 million bpd recorded during the week until March 27, the Energy Information Administration said in its weekly report on supply and demand.
In a separate report released on Tuesday, the EIA predicted that US production would average 11.8 million bpd by 2020, adjusting to demand lost due to the coronavirus crisis. Crude oil production in the United States hit a record high of 13 million bpd earlier this year.
, the New York-traded benchmark for crude oil, rose 42 cents, or 1.8%, to $ 24.05 per barrel at 1:30 p.m. ET (5:30 p.m. GMT).
, the London-based global benchmark for crude oil, rose 11 cents, or 0.4%, to $ 31.98.
The market rose despite the EIA reporting a jump of 15.2 million barrels in the United States for the week ended April 3, adding to the gain of 13.8 million barrels the previous week.
Market players estimate that the 600,000 b / d drop in production reported by the EIA, as well as its expectations of a further 600,000 b / d drop – based on reduced production forecasts from the agency for 2020 – will constitute the American “offer” of reductions discussed at meetings of world producers. this week.
OPEC is scheduled to hold a video meeting on Thursday with Russia and other OPEC + allies to discuss production cuts that could ease demand lost due to the Covid-19 crisis.
Energy ministers from the Group of 20 countries are scheduled to meet on Friday via another video link to discuss the matter, with Energy Secretary Dan Brouillette who is expected to represent the United States.
Analysts have said they expect Brouillette to offer EIA data as evidence and contribution to the US production cuts.
“Brouillette has already (probably) given in the weekly EIA report today (as) the contribution of the United States to the reduction of supply to GLOPEC”, tweeted Olivier Jakob, director of Zug, the Swiss energy consultancy firm Petromatrix, referring to the G-20 meeting.
This will be consistent with the message that has been coming out of the White House since President Donald Trump launched oil producer meetings this week.
Trump, who threw the ball after calling on Saudi Crown Prince Mohammad bin Salman and Russian President Vladimir Putin to save the market, said on Monday that he was not considering further cuts in the United States above this. that happened “automatically” on the market.
But the implied supply of 1.2 million barrels by the United States appeared to be a drop, given analysts’ estimated loss of 20 to 30 million barrels.
Russia has suggested that it cannot offer more than 600,000 bpd due to fundamental constraints in its oil infrastructure. At the same time, the Kremlin said that “market-driven declines in oil production are not the same as actual production cuts” – a warning that the US supply of “automatic” market-based declines will not be enough.
Saudi Arabia has not yet committed to a specific figure.
“OPEC may not reach an agreement because the United States says a cut is occurring” naturally “and will not do more,” said Tariq Zahir, founder of the fund Tyche Capital Advisors focused on petroleum in New York. “In this case, we could see the prices of oil fall to the teenagers rather accelerated. “
WTI hit an 18-year low of $ 19.27 last week.