Published: Wed, June 27, 2018
Markets | By Noel Gibbs

Crude oil futures edge higher as focus shifts to USA inventories - Oil

Crude oil futures edge higher as focus shifts to USA inventories - Oil

No wonder, then, that WTI booked a rise of 6 percent last week, and though it might ease off the current highs, it will hardly fall low enough for drivers to be happy.

The Organization of Petroleum Exporting Countries (OPEC) last week agreed to boost oil production after consumers from the USA to India and China expressed anxiety over rising prices.

"OPEC was able to overcome objections by Iran and others to production increases by framing their decision as a return to the originally agreed 1.8 million b/d cuts", S&P Global Platts Analytics said.

"This is a larger increase than presented Friday although the goal remains to stabilize inventories, not generate a surplus".

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"We think it is unlikely that these producers will flood the market and crater oil prices, but by the same token the effect of high prices on both demand and the temper of the United States president appear to be unpalatable for the group", Gammel said.

Brent crude LCOc1 gained $1.58 to settle at $76.31 a barrel, while West Texas Intermediate crude CLc1 climbed $2.45 to settle at $70.53. The spread between the European and American markers narrowed 18 per cent Monday and has nearly halved in under a week.

Prices initially jumped after the OPEC deal was announced late last week as it was not seen boosting supply by as much as some had expected. Stockpiles at Cushing have slumped for five weeks with the start of the summer driving season when demand peaks. US crude's discount to Middle East benchmark Dubai oil shrank to the smallest since May 16.

An outage at Syncrude Canada's oil-sands facility may lead to a 360,000 barrel-a-day shortage for all of July, which could spur a further draw down in inventories at the US hub, Goldman said.

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So far, the year 2018 has been a good one for commodities, particularly crude oil.

Output curbs by the group and its allies since past year helped eliminate a global glut and boosted Brent to $80 a barrel for the first time since 2014. He predicts there could be a "sharp" increase in oil production over the next few months. Trump said he hoped that the group would increase output substantially in a tweet on June 22, after the end of the ministerial gathering.

"Saturday's OPEC+ press conference provided more clarity on the decision to increase production, with guidance for a full 1 million bpd ramp-up in 2H18", Goldman Sachs said in a note on Sunday.

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