Oil prices drop as supplies increase

Marco Green
June 13, 2018

Fox News contributor John Layfield on the impact of rising oil prices on the US economy.

As oil prices continue to fall, the American Petroleum Institute (API) reported a mild draw of 730,000 barrels of United States crude oil inventories for the week ending June 8, compared to analyst expectations that this week would see a much larger draw in crude oil inventories of 2.744 million barrels.

U.S. crude oil production for yet another week for week ending June 01-the most recent data available-increased to 10.800 million bpd, according to the EIA.

"The United States shows by far the biggest gain (about 75 percent of the total across 2018 and 2019), but recently this expansion has not been without stress", the report said, referring to a gap in recent weeks between the U.S. and European oil futures contracts.

OPEC and Russian Federation decided together in 2016 to cut their supply in order to push prices up following a crash in prices induced by a global crude production glut.

OPEC and other producers will meet on June 22-23 in Vienna to discuss future production policy.

The IEA report comes a day after OPEC warned of "considerable uncertainty as to world oil demand".

However, oil dipped on Wednesday amid speculation that the deal may be revised following reports that both Russian Federation and Saudi Arabia are ramping up production.

Dutch bank ING, however, said some OPEC members would "struggle to push production back to October 2016 levels".

Lukman Otunuga, analyst at futures brokerage FXTM, said higher oil production and forecasts of more to come were undermining prices.

Rising U.S. stocks partly reflect a surge in U.S. crude production C-OUT-T-EIA, which has jumped by nearly a third in the last two years to a record 10.8 million barrels per day (bpd).

"To make up for the losses, we estimate that Middle East OPEC countries could increase production in fairly short order by about 1.1 mb/d and there could be more output from Russian Federation on top of the increase already built into our 2019 non-OPEC supply numbers", it added.

"With rising production from USA shale adding to oil's woes and reviving oversupply concerns, further downside could be a possibility in the short to medium term", Otunuga said.

Official US production and inventory data is due to be published on Wednesday by the Energy Information Administration.

Other reports by Click Lancashire

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