Oil prices fall on slow drain of supplies

The increase came despite the threat of a potential rise in shale oil production on the back of the rally in global oil prices, as energy companies ramped up drilling.

"A triumvirate of draws for crude, gasoline and distillates is a supportive influence for prices", said Matt Smith, director of commodity research at ClipperData, reports Market Watch. A final decision is expected after the upcoming OPEC ordinary meeting scheduled in Vienna later this week, on May 25, which will be followed by a joint meeting between OPEC and participating non-OPEC countries. Since bottoming out in September, however, US crude oil production has increased by almost 465,000 b/d.

U.S. West Texas Intermediate (WTI) crude CLc1 was down 16 cents, or 0.3 percent, at $48.91.

U.S. shale producers have kept oil prices below Saudi Arabia's target of $60 a barrel, with supplies coming back online at faster rates than expected.

The U.S. Energy Information Agency (EIA) reported that U.S. commercial crude stockpiles fell by 1.8 million barrels to 520.8 million in the week through May 12.

Saudi Arabia and non-OPEC Russia have said they want to see output curbs extended for another nine months until March 2018.

Both countries said on Monday they would extend an agreement to cut output, originally created to end in June 2017, for a further nine months until March 2018.

"On the one hand, you have traders who worry about the efficacy of OPEC's oil cuts on inventory levels".

In late November, OPEC agreed to cut production by 1.2 million barrels a day, the first such reduction agreement since 2008.

"The most closely watched data point on the supply side is USA crude production", said researchers.

North Sea oil shipments to Asia have also been at record highs this year, with 19 tankers delivering in the first quarter and a similar amount expected to go to Asia in the second.

"Capped OPEC/Russian production with stronger seasonal demand during summer sets the stage for oil prices to reach $60 a barrel over the coming months", Giovanni Staunovo said.

The downward correction partly reversed gains from the previous session when prices rose on the back of a drawdown in United States crude inventories and a slight dip in American production. The increase, OPEC said, represents the biggest increase among countries within the oil producers' group.

  • Zachary Reyes