Oil at 3-week low as rising output risks OPEC-led deal

Crude fell more than 1 percent on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump's decision to withdraw from an worldwide climate accord will spur further domestic production and contribute to a persistent global oversupply.

US West Texas Intermediate (WTI) crude futures traded at $48.70, down 96 cents, or two per cent.

Global benchmark Brent crude futures were down $1.15, or 2.2 per cent, at $50.69 a barrel by 1039GMT, after earlier touching $50.63 a barrel, the weakest since May 12.

Commodity markets were absorbing news the United States would withdraw from the landmark 2015 global agreement to fight climate change, a move that fulfilled a major campaign pledge but drew condemnation from USA allies.

Data released Thursday by the U.S. Energy Information Administration showed that commercial crude inventories fell by 6.4 million barrels in the week to May 26, compared with analyst expectations for a decrease of 2.5 million barrels.

Todd Gordon of TradingAnalysis.com, who correctly went short just before the OPEC meeting last week, expects crude oil prices to fall further.

Surging U.S. production has put a strain on OPEC members' efforts to curb production to drain a global crude supply overhang and to prop up prices. Analysts polled by Reuters expected US stocks to have fallen by 2.8 million barrels last week, their eighth straight weekly decline.

The revival in Libyan crude production comes after the Organization of Petroleum Exporting Countries and allied suppliers agreed on May 25 to extend a deal to cut production to battle a global oversupply until the end of March. A market survey estimated that United States crude oil inventories would fall by 2.8 MMbbls (million barrels) between May 19 and May 26, 2017.

Faced with lingering glut woes, the oil cartel discussed last week reducing output by a further 1 to 1.5 percent, and could revisit the proposal should inventories remain high, according to sources.

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

"We may or may not see more huge draws".

Libya's biggest oil field boosted production, allowing the OPEC nation to pump crude at the highest level since October 2014.

Rising output from OPEC members Nigeria and Libya, which are exempt from the output reduction deal, is also undercutting attempts to limit production.

Libya's state-run National Oil Corporation said on Monday that it expects oil production to rise to 800,000 barrels per day (bpd) this week.

  • Zachary Reyes