Oil trades near three-week high after United States drilling slows

Libya and Nigeria negate OPEC's cut in oil output

Taking Dubai oil as a benchmark, prices so far in 2017 are 25 percent above last year's $41 average, while OPEC production in the same time is 2 percent, or 700,000 bpd, below 2016's average, he said. Experts have described what has happened to oil prices since February 2017 as the worst half recorded in 20 years. Forty-six percent see it holding in the high $30s if it does go below $40 per barrel.

Of course, drivers can thank the oil market for those savings.

Oil futures advanced for a seventh consecutive day on Friday, as shale explorers broke the longest stretch of uninterrupted growth in three decades. Oil prices in American standard West Texas Intermediate rose by $ 2.28 a barrel to $ 53.78 barrel in morning. That helped support the argument that shale producers may have stumbled amid a prolonged patch of low prices.

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Brent crude, the global oil benchmark, rose over 7% last week while West Texas Intermediate, the US gauge, gained 6.5%, with both benchmarks pushed higher by data showing the first decline in USA oil-drilling activity since January. Front-month prices gained 5.2 percent last week. So if demand rises over time and Opec sticks to its deal in the longer term, we see a forward price anchor for WTI in the $45 to $50/bbl range and a backwardated structure of $3 to $7/bbl.

Commodities analyst Dennis Gartman, publisher of the Gartman Letters, says that the world must understand that the hydraulic fracturing and horizontal drilling technologies used by US drillers have not even begun to be used in other parts of the world. The market "is still very oversupplied".

"The decline signals that USA oil supply struggles to remain profitable between $40 and $45 a barrel", said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia. Every dollar move in the price of oil in a $40 to $60 band adds or subtracts about 100 thousand b/d to United States crude supply.

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Saudi Arabian crude, for the most part, comes from the titanic Ghawar field and a few other large deposits, meaning imports from the Kingdom are relatively consistent in grade. And recent reports suggest that Saudi Arabia may specifically cut oil shipments to the U.S.in an attempt to improve inventory data. Management at Tullow has recently undergone a change and there is a new CEO and CFO in place coupled with a deeply discounted rights issue that was completed earlier in the year.

The International Energy Agency (IEA) says that oil production in Libya in May reached its peak since 2014, having increased from 190,000 barrels per day to 740,000 barrels per day in April.

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