The Organization of the Petroleum Exporting Countries (OPEC) has been trying to tighten the supply chain, although the U.S. drilling continues to hinder the efforts. Result? Oil prices plunged on Monday, which means the trading activities will remain subdued at the start of the new week, which marks public holidays in the U.S., Britain, and China.
While U.S. West Texas Intermediate (WTI) crude futures were trading at $49.63 per barrel on Monday at 0253 GMT, down 0.3 percent, Brent Crude futures were down 15 percent, trading at $52.00 per barrel.
Pledge to Cut Production Failing to Meet Expectations
Those who are a part of OPEC, had made an agreement last week with non-OPEC producers to reduce the production by nearly 1.8 million barrels per day up to the end of the first quarter of next year (2018). However, the agreement does not seem to be bearing as many fruits as investors had anticipated initially, as these efforts have failed to increment the oil prices much beyond $50 per barrel.
OPEC’s Success depends on the U.S.
The U.S. have opted to stay out of OPEC, and the production has escalated 10 percent since mid-2016, touching the levels of top oil producing countries such as Saudi Arabia and Russia. U.S. drillers continue to add to their rigs for the 19th straight week, up to 722 now, and the current capacity is 9.3 million bpd.
Most of the U.S. production is owing to growing number of onshore resources, also called as shale oil fields. As per the analysts, reduction in bloated global fuel inventories is one of the key to reining in current oversupply.