Oil prices slip on bulging U.S. crude stockpiles, ample supplies

In November a year ago, OPEC and other producers, including Russian Federation agreed to cut output by about 1.8 million barrels per day between January and June, but so far the move has had little impact on inventory levels.

Crude oil prices could react to broader market movements in response to an early morning announcement from U.S. Treasury Secretary Steven Mnuchin, who said the White House was ready to introduce what could be the largest tax reform effort in U.S. history.

Brent crude futures, the global benchmark for oil prices, were at $51.58 per barrel, down 24 cents, or 0.46 percent, from their last close.

JP Morgan told the news agency: "Crude markets are close to floating storage economics and this is a bearish sign for output price developments". According to the investment bank, the Gulf states will be forced to extend cuts, if they "wish to keep prices much above $50 per barrel". A number of major crude producing nations reached an initial agreement to extend output cuts, Saudi Arabia's oil minister said last week.

Halliburton Co. boosted sales in North America as the world's largest provider of fracking services was buoyed by rapidly rising rig counts in the prolific Permian Basin and other US shale plays.

"This means there is a lot of upside risk to USA supplies", he said.

OPEC Secretary-General Mohammad Barkindo said on Thursday that a global oil overhang was declining, but he added that stocks remained high and needed to fall further. US crude futures CLc1 ended at $49.62 a barrel, down 2.2 percent, or $1.09.

Finally, UBS commodity analyst Giovanni Staunovo comments, "The production cuts mean there is less heavy oil supply". Crude prices have benefited somewhat from talks of a six-month extension to to the cuts, but ramped up USA production has curbed any gains.

The second reason oil prices and energy ETFs are struggling is that the oil market rebalancing that OPEC is attempting to hasten is being delayed by rising USA production. That boosted gasoline inventories to 241 million barrels, about where they were a year ago, which sapped refining margins all throughout last year. Last year, Nigeria made a lot of headlines because of the string of attacks on pipelines from the Niger Delta Avengers. API also reported gasoline supplies increased by 4.4 million barrels and distillate inventories decreased by 360,000 barrels.

Oil prices dipped on Monday, reversing earlier gains as concerns about a pick up in USA drilling activity trumped expectations that OPEC will extend output cuts till the end of 2017. "There was a narrative that the OPEC/non-OPEC cuts would be effective and balance the market". Money managers boosted wagers that US oil futures would increase in the week to April 18, government data showed.

Crude oil prices fell about 7% last week, as traders were wary that the OPEC production cuts are proving to be ineffective considering the increased United States shale oil production.

"It is evident that. crude markets are still struggling to clear (oversupply)", JPMorgan said in a note to clients this week.

That should help push oil prices back up.

  • Zachary Reyes