Oil sinks more than 3.5 pct on shock US gasoline stocks build

Ashley Carr
June 15, 2017

OPEC and other exporters such as Russian Federation have agreed to curb oil production by almost 1.8 million barrels per day (bpd) to the end of the first quarter of 2018.

As per the data showed by the American Petroleum Institute, the stocks of usa crude have increased by 2.8 million barrels in the week to 511.4 million.

USA crude fell 3.57 percent to $44.80 per barrel and Brent was last at $47.01, down 3.51 percent on the day.

Another steep drop came Wednesday after two new oil market reports, one showing tepid gasoline demand in the United States and the other showing an increase rather than a cut in OPEC output.

Benchmark Brent crude LCOc1 was 17 cents lower at $48.12 per barrel by 1236 GMT, reversing gains made earlier in the session when it edged up to $48.67.

The problem for the Saudis is that it appears fellow Opec members are not doing as much to help the cause of rebalancing oil markets and therefore boosting prices.

Nonetheless, the increase in output and exports via tanker show the scale of the challenge facing OPEC, and its de facto leader Saudi Arabia, the world's biggest crude exporter. Output at major American shale fields will reach a record in July, according to the EIA.

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The speed and scale at which US shale production has bounced back from the slump in 2015/16 has confounded OPEC and all the other major forecasters.

The IEA said in its monthly oil report Wednesday it expects non-OPEC production to grow 700,000 barrels daily this year and 1.5 million barrels next year, "which is slightly more than the expected increase in global demand".

OPEC wrote in its latest oil market assessment that rebalancing is underway but at a slower pace because of the "shift in US supply from an expected contraction to positive growth". "But then, we saw several pullbacks", said Michael Tran, director of global energy strategy at RBC Capital Markets.

Trade data show Opec shipments to customers averaged around 26 million bpd in the last six months of 2016 and are set to average around 25.3 million bpd in the first half of this year.

Overnight, crude futures settle higher on Tuesday as investors looked ahead to fresh USA crude inventory data expected to show draw in crude stockpiles, offsetting concerns about an uptick in output from OPEC members.

If the shale boom had continued, with USA production growing at more than 1 million bpd per year, OPEC's share would have fallen even further in 2015 and 2016 (http://tmsnrt.rs/2srWKEf).

"We have regularly counselled that patience is required on the part of those looking for the rebalancing of the oil market, and new data leads us to repeat the message", the IEA said. In short, whenever oil demand rises and prices go up, it will be met by increased supply from the US.

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