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Oil prices start May in the red

IEA sees balance starting to return to the global energy market.

By Daniel J. Graeber
Oil prices start May in the red
Crude oil prices start May in the red after a data review show oil production from OPEC increased at a fast clip in April, File photo by Monika Graff/UPI | License Photo

NEW YORK, May 2 (UPI) -- With some contracts expiring, crude oil prices were volatile early Monday though supply-side pressure emerged again to drag on evolving market dynamics.

Crude oil prices ended April on a down note, though prices for the month had rallied about 30 percent. Friday's downward movement was triggered by data showing production from the Organization of Petroleum Exporting Countries was higher in April. Data compiled by the Bloomberg news agency show OPEC production increased 1.4 percent for its largest monthly gain in more than 25 years.

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A proposal reviewed last month to freeze production at January levels collapsed after Saudi Arabia said no agreement was possible without Iran, which said it would consider participating only after it regained a market share lost to economic sanctions. OPEC production in January, however, was higher than in March.

West Texas Intermediate, the U.S. benchmark for the price of crude oil, was volatile in early Monday trading as the contract for June is set to expire, losing about 0.25 percent to start the day at $45.81 per barrel. The price for Brent crude oil, now in the July contract, was down 0.78 percent to $47 per barrel to start the month of May.

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April's rally was triggered in part by signs that supply-side pressures were easing. Fatih Birol, the executive director of the International Energy Agency, said during a weekend conference in Japan the market was moving back toward balance.

"In 2016 non-OPEC supply is set to drop by over 700,000 barrels per day, the largest fall since 1992, helping to push the oil market towards balance," he said in his presentation notes.

A short-term market report from the U.S. Energy Information Administration said demand is driving crude oil prices higher, "but high inventories should constrain further price increases." EIA expects U.S. crude oil production to decline moving through 2016.

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Spending, however, remains constrained, with Birol warning delegates that "world upstream oil and gas investment continues to fall."

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