Crude Prices Tumble Ahead of US Inventory Report

Oil prices extended gains on Thursday after government data showed a larger-than-expected drop in USA crude inventories as refinery activity increased and crude imports fell.

Oil prices were down on Wednesday with Brent crude trading 55 cents lower at $51.29 per barrel, while US West Texas Intermediate fell 51 cents to $49.15. WTI had its third straight monthly decline, ending May down more than 2 percent.

The monitoring committee was established to monitor the implementation of the oil production cut agreements between OPEC countries and independent oil producers.

Both Moscow and Riyadh said cooperation would continue beyond the current agreement as both countries were still trying to find ways to co-exist with US shale oil producers, which are not part of the global output reduction deal.

Rising output from the United States and Libya undermines efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russian Federation to tighten an oversupplied market by cutting production by around 1.8 million bpd until the end of the first quarter of 2018.

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Oil prices tumbled after the agreement was reached, as some had hoped for deeper cuts.

A week ago, the Organization of the Petroleum Exporting Countries and a number of non-OPEC producers met in Vienna to extend a deal to cut 1.8 million bpd from the market until March 2018.

"The worry is that you have rising output in the US and that's going to offset cuts", said Gene McGillian, manager of market research at Tradition Energy in Stamford, Conn.

Brent crude futures for July fell $1.53, or 3.0 percent, to settle at $50.31 a barrel on their last day as the front-month.

That followed the American Petroleum Institute saying us crude supplies fell 8.7 million barrels last week by its count.

Traders said that prices had received support from a tightening physical crude market.

The US move to withdraw from the Paris Climate Accord increased market concerns surrounding increased US and global oil supplies which triggered renewed selling.

Libya's oil production has risen to 827,000 bpd after technical problems were resolved at the Sharara field.

All dynamics are factored in: The IEA's growing outlook for global oil demand, the now confirmed OPEC and Russian production cuts, and a robust outlook for US production growth. Oil markets were subdued today, with Brent struggling to maintain US$50 (RM214) per barrel as efforts led by Opec to tighten the market were undermined by persistently rising United States production.

  • Zachary Reyes