Crude prices slipped to the lowest in nearly a year last week as concern grew about the persistence of a three-year old surplus of oil inventories.
It appears the oversupply story will be with us for longer than expected and while fundamentals remain out of balance, the oil price will see little movement to the up side.
OPEC and other major producers made a deal in December 2016 to remove 1.8 million barrels a day from the market.
World oil prices continue to rise on June 30, as investors remain optimistic amid the decline in U.S. crude production.
The current U.S. crude futures were up by a massive 5.1% increase this week alone, while the Brent crude also did well on this week having 4.8% increase on its belt.
WTI and Brent crude are both up 0.8% by mid-morning in London, reaching $45.30 and $48.02 per barrel respectively.
"Meanwhile, U.S. producers will also cut back on drilling due to lower cash flow from operations caused by the drop in prices", Hatfield said. It has been a bullish week for the oil market", and "There are two key drivers. "We could see more gains if there is a further drop in oil output, and the other factor is a weaker U.S. dollar".
US crude production dropped 100,000 barrels per day (bpd) to 9.3 million bpd last week, the steepest weekly fall since July 2016. He adds, "despite the recent oil price drop, prices are likely to rise in 2017, with more upside potential in 2018".
On Thursday, about 6 million barrels of North Sea Brent crude were being stored on ships, down from four-month highs of as many as 9 million last week, and trading sources said it seemed now refineries were starting to take in more cargoes.
Bank of America Merrill Lynch analysts cut their forecast for average 2017 Brent crude prices to $50 a barrel from $54 and WTI to $47 from $52.
US light crude was expected to average $51.92 a barrel this year, dipping from last month's forecast of $53.52.
Earlier this week, reports suggested that while OPEC may be mulling over deeper oil production cuts, they won't be rushing to make that decision, even though a panel monitoring the cuts will be meeting next month.
The economists comments come in the context of the Organisation for Petroleum Exporting Countries (OPEC), having previously announced that its members would cut production in order to force the price upwards.
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