US crude futures hit six-year low despite OPEC report

US oil futures started the week on a very soft note, plumbing six-year lows despite what some observers described as a bullish report on Monday from the Organisation for Petroleum Exporting Countries (OPEC).

As of 14:50 front month West Texas crude futures were lower by 3.28% to $43.38 per barrel on the New York Mercantile Exchange (NYMEX).

In its latest monthly Oil Market Report (MOMR) OPEC said a continuing decrease in rig counts [in the US] suggested slower growth in US oil production.

OPEC added: “A drop in production can be expected to follow [the decline in the oil rig count], possibly by late 2015.”

Monday’s moves in the price of crude came in the shadow of the on-going discussions by the P5+1 nations with Iran regarding what its widely suspected to be its nuclear arms programme.

Traders eye negotiations with Iran

“We are optimistic that a new incremental framework for future negotiations between Iran and the P5+1 will be reached at the end of March. Iranian crude and condensate exports may increase by as much as 300 kb/d by June but this would be a function of lower domestic demand and increased South Pars condensate exports, irrespective of a change in the sanctions regimes,” analysts at Barclays wrote on Monday in a research note e-mailed to clients.

However, they cautioned that “sanctions will not be removed in one fell swoop.”

In its MMOR the cartel of producing countries maintained its forecasts for global oil demand growth in 2015 largely unchanged at 1.17m barrels per day.

Half of said increase was projected to come from China and the Middle East.

“Sanctions will not be removed in one fell swoop.”

Estimated supply growth from outside of OPEC in 2015 was maintained at 850,000 barrels a day. Last year’s output growth was revised higher by 50,000 to 2.04m.

In 2015, required OPEC crude – the so-called “call on OPEC” - was projected at 29.2 mb/d, also unchanged from a month earlier, according to the report.

OPEC crude production declined by 0.14m barrels a day (b/d) in February to reach 30.02m b/d, according to secondary sources cited by the cartel.

In terms of days of forward cover, OECD commercial stocks stood at 59.3 days, 1.5 days higher than the five-year average, the MMOR revealed.