Oil under modest pressure on consumer demand issues

Posted June 06, 2017

Falih, who has been on a visit to Russian Federation this week, said it would then be able to judge if the cuts had been effective in supporting oil prices which have halved in the last three years on the back of a global oversupply glut.

USA oil production has already been increasing in recent months since the price of crude came off lows previous year, making expensive shale oil extraction more economically viable.

So July West Texas Intermediate crude futures slid 70 cents, or 1.5%, to settle at $US47.66 a barrel, for its lowest close since May 10 - down 4.3% for the week, which was the largest weekly decline since the week ended May 5.

OPEC and non-OPEC members last week agreed to extend production cuts for a period of nine months until March, but stuck to production cuts of 1.8 million bpd agreed in November a year ago. "As long as USA crude stocks draw more because of high exports than low imports from OPEC, it will be hard to have a strong price recovery".

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Global benchmark Brent crude futures were down 23 U.S. cents, or 0.45%, at US$50.4 a barrel by 0316 GMT.

OPEC's next official monthly report, which includes individual members' production figure and global inventories, is scheduled for release on June 13.

Crude fell 1 percent on Friday, heading for a second straight week of losses, on worries that U.S. President Trump's decision to withdraw from a global climate accord could ultimately result in an overabundance of oil production.

He said the nation's oil production was still hovering around 1.5 million barrels per day, down from around 2.2 million b/d. While U.S. stockpiles have edged lower, rising American production and drilling is fanning concerns that OPEC's efforts to trim a global glut will be hampered.

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USA crude production has also continued to increase, rising to 9.34 million bpd, up almost 500,000 bpd from a year-ago.

Nigeria and Libya had earlier been exempted from an OPEC and non-OPEC producing members' agreement to extend the crude oil production cut by another nine months to allow further rebalancing of the market.

The price signal reflected other signs that an effort led by the Organization of the Petroleum Exporting Countries (OPEC) to curb production by nearly 1.8 million barrels per day (bpd) was starting to impact actual supplies. That has kept prices under pressure, rather than raising them, as OPEC hoped.

But Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance, said the USA decision to walk away from the climate agreement was not likely to impact oil markets.

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Russia, which has cut production by 300,000 bpd under the deal, could increase production next year to as much as 11.07 million bpd, the country's deputy energy minister told Reuters.