Oil dips on concern over rising U.S. output, OPEC tensions

Andrew Cummings
June 9, 2017

Global oil prices turned lower on Thursday, failing to hold on to slight gains on the heels of the sharpest daily fall since early March on an unexpected build up in USA crude inventories last week.

American crude production will average more than 10 million barrels a day in 2018, breaking a record nearly five decades old, according to the EIA's monthly Short-Term Energy Outlook report Tuesday.

U.S. Gasoline stocks also rose by 3.3 million barrels.

Brent crude rose 31 cents to $48.37 per barrel, while the US West Texas Intermediate increased the same to $46.03 per barrel. West Texas Intermediate, the US benchmark for the price of oil, was down in parallel to $47.71 per barrel.

Inventories of US crude rose by roughly 3.3m barrels in the week ended May 26, confounding expectations of draw of around 3.5m barrels. API also reported gasoline supplies increased by 4.1 million barrels and distillate inventories increased by 1.8 million barrels.

USA gasoline futures fell 4 percent to $1.49 a gallon, the lowest point since May 10, again due to rising inventories. US benchmark futures on oil have slid more than 11 percent in 10 days of trading. "A week ago, you could say three of the past four weeks, it has come down, you are starting to see a trend develop".

But analysts saw a risk that rivalries between OPEC members could weaken the production cut agreement.

- USA crude futures settled down 5 percent, or $2.47 a barrel, at $45.72 a barrel.

The week OPEC agreed to extend oil-production cuts for another nine months, US crude exports hit a new record.

Royal Dutch Shell (LSE: 0LN9.L - news) lifted force majeure on exports of Nigeria's Forcados crude oil, bringing all the country's oil exports fully online for the first time in 16 months.

"These figures spell a setback to the joint effort by OPEC and some non-OPEC countries to curb their output", commented Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London, to Reuters.

"Port restrictions on Qatari flagged vessels are going to cause loading disruptions", said Jeffrey Halley, analyst at brokerage OANDA, adding this could "put a floor on crude in the short-term rather than starting a panic rally".

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