Crude Down In Asia On API Build, China Industrial Data Shrugged Off

Marco Green
June 19, 2017

Crude oil prices fell almost 4 percent Wednesday after government data showed gasoline inventories and oil production increased.

According to the Energy Information Administration, US crude inventories fell by 1.7 million barrels in the week ending June 9, with the original market expectation registering around 2.7 million.

USA crude settled down 27 cents at $44.46, after touching a six-month low of $44.32 a barrel.

Crude output from OPEC nations rose by 290,000 bpd in May to a 2017 high of 32.08 million barrels per day, according to the EIA. West Texas Intermediate (WTI) crude futures were down 12 cents or 0.3 percent at $44.61 per barrel.Crude futures benchmarks are sitting near their lowest levels since late November previous year when production cuts led by the Petroleum Exporting Countries (OPEC) were first announced.

That means an entrenched market glut that has kept a firm lid on oil prices is likely to persist, despite disciplined efforts by most OPEC producers to rein in their own output.

Both contracts hit their lowest since May 5, driving them into technically oversold territory.

The price falls are due to ongoing high supplies despite the pledge to cut from within OPEC and because of rising output from the US.

OPEC's pledge was to cut some 1.2 million bpd, while other producers including Russian Federation would bring the total reduction to nearly 1.8 million bpd.

The effectiveness of the OPEC-led cuts has been undermined by increasing United States oil production, mostly from shale drillers.

This implies that crude oil price, which stood at $48.27 per barrel, last week, would increase to $51 per barrel or more, signalling a good omen for Nigeria, which depends on crude oil for its fiscal responsibilities.

The oil market needs strong demand to help offset the rapid increase in supply.

"For total non-OPEC production, we expect production to growby 700,000 bpd this year, but our first outlook for 2018 makessobering reading for those producers looking to restrainsupply", the IEA said. Yet crude prices have slid about 12 percent since that day as other countries have boosted output.

But OPEC members Nigeria and Libya, which are exempt from the deal, have increased exports as they bounce back from supply disruptions caused by protests, rebel activity and mismanagement.

Other reports by Click Lancashire

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