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.”

Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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