USA inventories of oil, gasoline fall in latest week
- Author: Zachary Reyes May 20, 2017,
May 20, 2017, 9:41
A balance sentiment was supported last week by a report from the U.S. Energy Information Administration that domestic crude oil inventories declined by 5.2 million barrels, easing some of the pressure from the glut as it was greater than at the same time a year ago.
"Low oil prices may bring satisfaction for some consuming countries in the short run, but in the long term as a result of reduced investment in new oil production, they could end up paying a much higher price for a barrel of oil", he said.
OPEC and the other producers are likely to cut oil production even more than the current 1.8 million barrels a day, according to Ed Morse, global head of commodities research at Citigroup.
Saudi and Russian Federation produce a combined 20 million barrels of crude oil a day - about one-fifth of global consumption - and other oil-producing nations are expected to follow their lead over cuts, the BBC reported.
Saudi Arabia and non-OPEC Russia have said they want an extension to output reductions of nearly 1.8 million barrels per day (bpd) that were initially agreed to run in the first half of 2017.
With two major crude-producing nations deciding to control output, other oil producers are expected to take a similar stance in OPEC's next meeting on May 25.
Oil stocks have tumbled 6.4% this year, the only group to decline in the MSCI All-Country World Index. In the midst of the reductions, production in the USA, which isn't a part of the contract, has ascended to the most abnormal amount since August 2015. On Wednesday, the rise in both benchmarks was seen after the news of drop down came in USA crude inventories and a dip in US output. We also expect these funds to outperform their peers in the future.
USA crude oil inventories fell for a sixth straight week, as OPEC efforts to reduce supply appear to be coming to fruition ahead of the cartel's upcoming meeting next week, while gasoline and distillate stocks also dropped.
Jefferies bank said it was lowering its oil price forecasts due to a surprisingly strong rise in U.S. production. The 13-member oil cartel last November formally agreed to reduce oil output through May, and it is meeting to consider extending the reduction. Analysts surveyed had estimated a draw in the stockpiles of 2.4 million barrels.
U.S. West Texas Intermediate (WTI) crude was down 16 cents, or 0.3 percent, at $48.91.
"If we reach $60/bbl by the end of the year, that might encourage Saudi Arabia and others to increase production and reap some of the increased cash flow for budgetary needs", Angelos Damaskos, a portfolio manager of United Kingdom -based MFM Junior Oils Trust Fund, said by phone.
"I think prices will move up to $51-$55 and in August may go to even $58", he said.