25 June, 2017
U.S. inventories fell less than forecast last week, keeping supplies more than 100 million barrels above the five-year average, according to data from the Energy Information Administration on Wednesday.
"Persistent weakness in gasoline demand has taken center stage among market participants as this could result in further builds in US crude stockpiles", said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.
Top producer Russian Federation, not an OPEC member but which signed up to the deal to cut output, is expected to export 61.2 million tonnes of oil via pipelines in the third quarter, equivalent to about 5 million bpd, against 60.5 million tonnes in the second quarter, according to industry sources and Reuters calculations.
Brent crude oil and the U.S. light crude dropped by 30 cents to $46.70 a barrel and $44.43 per barrel respectively to their almost six-month lows, reported Reuters. Brent futures are trading at higher prices for further-dated contracts, which is an encouragement for more production rather than less.
"The rebalancing of the market is underway, but at a slower pace, given the changes in fundamentals since December, especially the shift in USA supply from an expected contraction to positive growth", OPEC said in the report.
A Market Research Manager, Tradition Energy in Stamford, Gene McGillian, said in the report that fears of oversupply was driving the market, adding that crude oil price would appreciate soon.
China imported 12.5 percent more oil in the first four months of this year, but imports from Saudi Arabia rose by a paltry 2.5 percent.
Efforts to combat the oil glut have not been helped by figures this week that showed Opec as a whole increased production in May because of higher output by Nigeria and Libya, which are not covered by the recent cuts deal.
Shale producers and OPEC are now on a collision course, with OPEC curbing production to try to raise prices and shale drillers adding rigs to boost output.
Crude futures fell sharply Wednesday on higher stockpiles in the US and other rich nations despite the OPEC production deal. "Compared to the same quarters of a year ago, the first quarter is expected to increase by 100,000 bpd, while all other quarters are estimated to remain unchanged", OPEC said in the report. Crude output climbed while nationwide inventories fell less than predicted. And they have racked up production as prices rise.
The bulk of the upward adjustment in non-OPEC oil supply since December "has come from the US", OPEC said.
"Production growth in Libya and Nigeria and continued rig additions in US are complicating the picture, raising doubts on OPEC's strategy".