Oil Futures Fall Back Sharply

Despite being buoyed upwards on the optimism of OPEC production cuts, oil futures slid back sharply ā€“ a move being attributed to a market getting vehemently ahead of itself.

The sharp rise in oil seen earlier in Tuesdays trading session was reversed when sellers interpreted the rise of over 2% as a distinct opportunity, in anticipation of the market reversing itself.

Oman and Kuwait had enhanced the optimistic sentiment maintained by many bulls in the oil market, by announcing they were in the process of full-compliance regarding the cuts proposed in the OPEC oil agreement signed at the end of November 2016. The market reacted with distinct enthusiasm, with Brent Crude oil, the international benchmark, rising to $58.04 a barrel in Tuesdays early trading session. The benchmark crude fell sharply by 2.27% to $55.54 a barrel at 18:20 GMT.

US shale producers are causing increasing concerns that much of the 2% of global oil supply subject to the proposed reduction by the OPEC deal, will be reversed if US shale producers begin cashing in on the higher prices via increasing their own production.

Already, moderate increases in drilling activity amongst US shale producers has planted a seed of weariness amongst some oil bulls, as the threat of an increase in global oil production will undo the price increase achieved by the OPEC supply cut.

Oil commodity markets are likely to be dominated by the OPEC agreement as well as the potential of US shale producers to begin reversing the production cuts, returning the market to a state of significant over-saturation.


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