US oil production seen thwarting OPEC effort to boost prices
US oil production seen thwarting OPEC effort to boost prices
15 June, 2017, 02:18
Oil prices suffered steep losses Wednesday after US government data showed a smaller-than-expected weekly decline in domestic supplies and an increase in gasoline stockpiles and crude production.
Benchmark Brent crude settled 43 cents higher at $48.72 a barrel while USA light crude settled up 38 cents to $46.46 a barrel.
That compares with analysts estimates in a Reuters poll for a 0.5 million barrel draw in gasoline stocks and a 2.7 million barrel draw in crude inventories. For one, higher-than-expected shale oil production in the USA partly offset Opec and non-Opec production cuts at the beginning of this year.
Crude oil inventory concerns have lingered, despite OPEC's curtailment on member and non-member production to the tune of 1.8 million barrels per day, and despite Saudi Arabia's ratcheting down oil exports to the United States, and promise to ratchet down more, by 35 percent in July.
Saudi Arabiareported to OPEC that it reduced output further by about 66,000 bpd in May to 9.88 million bpd.
Amid reports of inventory increases, further surges in future non-OPEC supply and prices lying stagnant in the $40s, it's becoming clear that the OPEC deal to extend production cuts in place since November has not had the desired effect.
The dilemma facing the Saudis is encapsulated by China, the world's largest crude oil importer and the Saudis biggest customer.
Meanwhile, the EIA has reported that shale production in the USA would reach an all-time high in July, at 5.475 million bpd and adding an additional rig to bring the total rig count to 719, continuing the twenty-two-week streak.
"This is very unusual for this time of the year, when gasoline demand is supposed to pick up", said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany. US West Texas Intermediate (WTI) crude futures were at $45.94 per barrel, down 52 cents, or 1.1 per cent.
"The revisions to non-OPEC supply growth have been much greater than the upward adjustments to world oil demand growth, accentuating the imbalance in the market", it said.
That comes as oil demand accelerates in the second half of the year, though total consumption is largely in line with the seasonal average.
The Organisation of Petroleum Exporting Countries (OPEC) on Tuesday said it would achieve the re-balancing of the crude oil market at a "slower pace", stressing that even its own output in May jumped as a result of increased production by Nigeria, and Libya, which were exempted by the agreement to reduce production.
"While the demand is robust, there is a serious likelihood that prices will sink next year to $30-$35 a barrel and will stay there for a while", Fesharaki added.
The bulk of the upward adjustment in non-OPEC oil supply since December "has come from the US", OPEC said.
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