Oil Inventories Fall More than Expected; Prices Rise

Jay Anderson
May 20, 2017

The Organization of the Petroleum Exporting Countries (OPEC) members made a decision to reduce output by 1.8 million barrels per day to rebalance the oil market for the first six months of this year. "For 2017, total USA liquids production is forecast to increase by 0.82 mb/d with crude oil contributing 0.6 mb/d", OPEC said.

Saudi Energy Minister Khalid al-Falih said on Monday that oil producers would "do whatever it takes" to rebalance the market and that he expected a global deal on cutting crude output to be extended through all of 2017.

Global oil prices recently dipped briefly under USD 50 dollars per barrel for the first time since OPEC and Russian Federation scaled back output as concerns whether the deal would be renewed and the impact of rising output in the United States weighed on the market.

U.S. crude production is expected to rise by more than previously expected in 2017 to 9.31 million barrels per day from 8.87 million bpd in 2016, a 440,000 bpd increase, the U.S. Energy Information Administration (EIA) said.

After falling to their lowest levels since OPEC agreed to cut production back in November a year ago, Goldman Sachs have warned oil prices are nearing "capitulation".

International Brent crude futures were at $50.46 a barrel at 4.38am GMT on Thursday, up 24c, or 0.5%, from their last close.

Oil prices surged more than 3 percent after the latest report on US crude stockpiles eased fears that have permeated the market in recent weeks, helping to drag prices to almost six-month lows.

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A source also told Reuters that seven million barrels is roughly two days' worth of oil imports into Japan, the world's fourth biggest importer.

"We are discussing a number of scenarios and believe extension for a longer period will help speed up market rebalancing" the Russian Energy Minister Alexander Novak said in a statement.

Oil prices rose on Tuesday, but faced headwinds from concern over slowing demand and the rise in United States crude output that has shaken investors' faith in the ability of OPEC to rebalance the market. Equatorial Guinea, which is Africa's third largest oil producer, said it had support from Saudi Arabia to join OPEC.

Russian Federation also said it was discussing prolonging cuts with other producers beyond 2017.

The American Petroleum Institute (API) reported a drawdown of 5.789 million barrels of crude oil, for the week ending May 5, which beat analyst expectations of a fall of 1.8 million barrels.

"OPEC has said it will try and extend its output cuts beyond June".

Other reports by BadHub

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