On Monday, the price of oil dropped as soaring production in North America was seen as undermining the efforts to tighten the supply that OPEC and Russia are leading.
Despite that, traders are saying that the overall market conditions remain strong because of production cuts and a healthy growth in demand.
Futures for Brent crude remained above $70 a barrel, but fell 19 cents from their previous close to $70.34 per barrel, in early Monday trading.
U.S. West Texas Intermediate futures were $66.91 per barrel which was up by 5 cents. Despite bullish sentiments, analysts are saying the market is under pressure from the increased output across North America.
Production of U.S. crude has increased by more than 17% since the middle of last year to more than 9.89 million barrels daily by the middle of January.
Output should break through the 10 million barrels per day threshold shortly. Energy companies in the U.S. added another 12 oil rigs to production during last week, taking that total to 759.
The production of crude in the U.S. is on par already with Saudi Arabia OPEC’s top exporter. Just Russia is producing more with an average of 10.98 million barrels daily during 2017.
There are signs as well that oil production in Canada has reached 335,000 barrels per day, and could begin increasing as its investments in the shale sector take hold. The overall production of crude in Canada is at 4.2 million barrels per day.
Oil company Total said Monday that the production at its oil sands Fort Hill project has begun and output would be 180,000 barrels per day within the next couple of months.
JPMorgan is expecting prices to drop towards the end of 2018 as markets start flushing with oil thanks to shale and other unconventional types.
Growing output in North America had been one of the factors holding the oil markets back. Crude has remained propped up due to the supply restraints led by Russia and the Organization of Petroleum Exporting Countries or OPEC. This has coincided with a strong demand following healthy growth in the world economy.
Because of that, prices of oil have increased nearly 60% since the middle of 2017 as more cash is poured into crude futures by investors in expectation of prices increasing.
Oil has been supported as well by the weakening dollar.