Oil Slides to Seven-Month Low on High Inventories

Posted June 15, 2017

OPEC and 11 rival exporters including Russian Federation have agreed toextend an existing deal to limit supply by 1.8 million bpd toMarch 2018, in order to cut global inventory levels.

The Fed "met expectations and delivered a dovish hike", said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wis.

A slide in technology stocks weighed on the Nasdaq and S&P 500 as investors anxious about the pace of economic growth after the rate increase and weaker-than-expected inflation data.

US shale production will surge to a record in July, the EIA projects. Prices added 43 cents, or 0.9 percent, to $48.72 on Tuesday.

At 2:22 p.m. ET, the Toronto Stock Exchange's S&P/TSX composite index was down 160.94 points, or 1.05 per cent, to 15,218.61.

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Traders said market intelligence firm Genscape had forecast a draw down of more than 1.8 million barrels at the Cushing, Oklahoma delivery point for USA crude futures.

Oil producers are facing increasing competition in major markets like China and India as OPEC and its partners continue efforts to curb output to clear a global glut.

USA crude inventories remain stubbornly high.

After rising for three consecutive days, Brent futures were down $1.81, or 3.7 per cent, at $46.91. The American Petroleum Institute signaled US crude inventories probably climbed a second week, ahead of data from the Energy Information Administration which is forecast to show a decline. Yet the group lowered expectations for non-member Russian Federation, which has been cooperating with Saudi Arabia on production, by 200,000 bpd, or about two-thirds of the original estimate.

US crude inventories added 2.75 million barrels last week, while gasoline stockpiles increased by 1.79 million barrels last week, the API said Tuesday, according to people familiar with the data.

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Additionally, gasoline stocks rose by 2.1m barrels, compared with analysts' expectations for a 457,000 to 500,000-barrel drop, casting doubt on a rise in demand during the United States summer driving season.

Saudi Arabia, the world´s top oil exporter, is leading an effort by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by nearly 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 in order to prop up prices.

After basing the legitimacy of its initial crude cutback initiative, and more recently its extension, on the argument that it was resulting in an imminent market rebalance, the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday admitted that the recovery is now underway at a "slower pace" - and that the cartel's output in May increased due to Nigeria and Libya being exempt from the deal. The move is meant to drain the market of excess supply.

The watchdog said its first forecast for 2018 made "sobering reading for those producers looking to restrain supply".

In the report, OPEC pointed to continued high compliance by its members with the supply deal and said oil stocks in OECD nations fell in April-although they are still 251 million barrels above the five-year average.

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The International Energy Agency says OPEC's plan to cut production and support prices are likely to be undone by increased output in non-OPEC countries like the U.S. Data earlier Wednesday showed U.S. consumer prices unexpectedly fell in May, suggesting a softening in domestic demand.