Published: Mon, June 19, 2017
Markets | By Noel Gibbs

Oil edges up towards data on reserves and production in US

Petroleum prices extended losses on Wednesday after US government data showed a smaller-than-expected drop in stockpiles of USA crude as refineries hiked output.

U.S. gasoline inventories rose 2.1 million barrels last week, putting them 9 percent higher than their five-year average for this time of year, according to the U.S. Energy Information Administration (EIA).

In addition, US crude stockpiles fell by 1.7 million barrels, less than the expected decline of 2.7 million barrels.

"Oil has been weighed down by the market's impatience with the generally slow pace of the global inventory drawdown amid a significant recovery in global oil supplies, particularly from the US", OPEC said in its June report today.

Global benchmark Brent crude rose 0.83 per cent to trade at $47.31 a barrel while the price of the U.S. benchmark, West Texas Intermediate (WTI), was 0.63 per cent higher at $44.74 a barrel.

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Last month, OPEC and top nonproducers made a decision to extend their production cut to remove 1.8 million barrels per day from the market until March 2018 in an effort to push stockpiles below the five-year average.

Oil prices have fallen by about 10% since Opec and non-member countries including Russian Federation recently agreed to extend production cuts until the end of March 2018.

The rise in domestic oil production also contributed to the decline in oil prices.

Natural gas futures for July delivery tacked on 0.4 cents to $2.937 per million British thermal units, as traders looked ahead to weekly storage data due later in the global day.

The impact of OPEC-led cuts has been undermined by rising US oil output.

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In its monthly oil market report, the IEA notes, "For total non-OPEC production, we expect production to grow by 700,000 bpd this year, but our first outlook for 2018 makes sobering reading for those producers looking to restrain supply".

The report said: "Overall, stable demand and low volatility are the factors that should push Brent prices up by $2 or $3 in the coming weeks".

Under the deal to support the market, OPEC is curbing output by about 1.2 million bbl/d and Russian Federation and other non-OPEC producers are cutting by half as much.

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.

The boost means OPEC is pumping more than its forecast of average global demand for its crude this year, hindering efforts to reduce a glut.

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