US shale oil production cut could hike price

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Shale oil output may finally be showing signs of a slowdown in the face of continued price weakness, according to data cited by ETF Securities in its weekly roundup of fund flows.

“US crude inventories grew by 1.3mn barrels, 2.7mn barrels below market expectations,” the ETF provider said, adding that investors continued to withdraw money on a net basis from funds offering exposure to US crude oil.

“Long WTI ETPs have experienced the largest four weeks of outflows since 2010.”

Still, investors should be expecting prices to edge higher in coming months, ETFS suggested.

“The weak inventory build corroborated an Energy Information Administration (EIA) report released earlier in the week that forecasted that US shale oil production would start to drop in May. Adding further to bullish sentiment was the withdrawal of government forces from oilfields in Yemen, reflecting a deteriorating internal situation which threatens the security of key oil transit routes. Going forward the price of crude will likely grind higher as shale output shows further signs of curbing and geopolitical tensions in the Middle East remain elevated. The main downside risks to the price in the near term are US dollar strength and the potential for onshore oil storage capacity to reach limits and force supply onto the market.”

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