Oil prices fall even as OPEC extends output cut

Although a sharp fall of US crude inventories could be seen as a supportive factor to oil prices, USA crude production rose to 9.35 million bpd last week, up almost 500,000 bpd from a year ago.

Brent for August settlement retreated US$0.68 to end the session at US$49.95 per barrel on the London-based ICE Futures Europe exchange.

Data from the American Petroleum Institute showed crude inventories were down by 8.7-million barrels at 513.2-million in the week to May 26.

US crude stockpiles have declined since hitting a record 535.5 million barrels at the end of March, according to Energy Information Administration data.

That compared with analyst expectations for a decrease of 2.5 million barrels.

Markets will be moved midway through the trading day once the EIA publishes official figures on USA crude oil inventories and other metrics.

U.S. President Donald Trump's withdrawal from the Paris agreement, the landmark 2015 global pact to fight climate change, drew condemnation from Washington's allies and many in the energy industry - and sparked fears that U.S. oil production could expand more rapidly than it is now.

Libya, an OPEC nation that's exempt from the production-cut deal, is said to have increased its output to 3-year highs of late.

Oil slipped below US$50 per barrel last week as the agreement by OPEC and its allies to prolong output curbs for nine months disappointed some investors hoping for deeper cuts. And, this very steep growth comes with USA oil prices locked below the price most analysts estimated as a minimum to grow U.S. oil production.

Oil markets edged higher on Monday as rising Saudi physical prices and signs of falling OPEC supplies slightly outweighed a persistent rise in USA production.

The President of the OPEC Conference and minister of energy of Saudi Arabia, Khalid Al- Falih, had said that the extension was necessary to further consolidate the gain by all stakeholders and the period would allow the market to achieve the five year average for stocks. Sentiment deteriorated further after data from industry group Baker Hughes on Friday showed US oil drillers adding 11 more active rigs in the week ended June 2. Growth from a smaller producer injecting "such a significant drag to oil prices suggests that market watchers remain extremely wary over any potential supply-glut widening", said Barnabas Gan, an OCBC economist.

Prices fell 2.2 percent this week.

That increase has helped bring down seasonally high gasoline inventories, as refiners are seeing increased demand for exports that has helped offset somewhat weak domestic demand for gasoline so far this year.

"A number of large-scale oil producers, that do not take part in these agreements, use such conditions to strengthen their market positions, and that leads rather to new imbalance than to the sustainable development", said Rosneft Chief Executive Igor Sechin, at an energy conference in St. Petersburg over the weekend.

  • Zachary Reyes