Oil drops on rising USA crude inventories, defies expected supply cut extension

Jay Anderson
May 20, 2017

On the New York Mercantile Exchange crude futures for June delivery dipped 0.22% to $48.96 a barrel, while on London's Intercontinental Exchange, Brent was last quoted at $52.09 a barrel.

Both benchmark prices started the day in negative territory after industry data from the American Petroleum Institute estimated that USA crude stocks had risen by 882 Mbbl in the week ending May 12 to 523 MMbbl.

Yesterday, prices turned around and July West Texas Intermediate crude oil and August Brent crude oil closed higher after the U.S. Energy Information Administration said U.S. crude stocks declined for the sixth straight week.

OPEC and its oil-producing partners may have to do more than merely extend their petroleum-output cuts to achieve their goal of rebalancing global supply and demand, the International Energy Agency said.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce the output by 558,000 barrels per day starting from January 1, 2017 for six months, extendable for another six months. Riyadh and Moscow say they should be extended until March.

The supply cuts of 1.8 million barrels per day (bpd) were initially agreed to run during the first half of 2017.

There's moss in Antarctica now, and it's getting even greener
A study published today in the journal Current Biology examined moss found along the eastern side of the Antarctic Peninsula.

"Having seen an initial short-covering rally, we now need OPEC and non-OPEC producers agreeing on the nine-month extension for the market to begin build up new long positions", Saxo's Hansen said.

The downward correction partly reversed gains from the previous session when prices rose on the back of a drawdown in United States crude inventories and a slight dip in American production.

"It has taken some time for stocks to reflect lower supply when volumes produced before output cuts by OPEC and eleven non-OPEC countries took effect are still being absorbed by the market", the report said.

The report showed that Saudi Arabia, the biggest producer in the group, recorded the second largest increase in April as it produced 9.946 million bpd, after recording a slide from 9.9 million bpd in March.

Trade sources and Reuters shipping data indicated a rising number of tankers storing oil offshore China because facilities on land are full.

Adding to concerns of ongoing supply increases, a report said North Sea oil production, which has always been seen as in terminal decline, is expected to jump by a net 400,000 bpd, or about a fifth of total output, in the next two years as producers improve operational efficiency.

Other reports by BadHub

Discuss This Article

FOLLOW OUR NEWSPAPER