Global Oil Prices Unlikely to See Big Impact From Qatar Row

Brent for August settlement dropped 22 cents to $49.25 a barrel on the London-based ICE Futures Europe exchange.

Oil has slipped this morning as prices come under pressure from an oversupplied fuel market. Export demand fell by 370,00 barrels a day and total overall demand fell by 1.8 million barrels a day.

Here's a chart showing the level of USA crude oil inventories by days of supply, courtesy of the Commonwealth Bank, comparing where it now sits compared to the levels of recent years. "However, we think these are likely to be temporary blips and expect stocks to resume falling over the rest of the summer".

Oil tumbled to its lowest in four weeks as an unexpected increase in USA crude and gasoline stockpiles stoked fears that the global supply glut will remain unabated.

Oil has struggled to stay above $50 a barrel amid speculation that rising USA output will counter supply curbs by the Organization of Petroleum Exporting Countries and its partners, including Russian Federation.

United States stockpiles grew by 3.3 million barrels in the week ending June 2, while the market had expected a 3.5 million barrels decline, the Energy Information Administration said.

"The OPEC agreement stands and is highly unlikely to change because of tension with Qatar", said Oystein Berentsen, managing director for oil trading company Strong Petroleum.

Still, Standard Chartered analysts said their market balance projections indicated a 1.4 million barrels a day global supply deficit in the second half of the year, even allowing for a rapid increase in U.S. output. In addition, OPEC is allowing Iran to continue to increase its production levels up to 3.797 million barrels per day.

Global consumption of oil and other liquids was 96.92 million barrels per day in 2016, according to the EIA.

That's because crude production in the United States, which is not participating in the cuts, has jumped by over 10 percent since mid-2016 to 9.34 million bpd, close to levels by top producers Saudi Arabia and Russian Federation.

Global oil prices turned lower Thursday, after posting their sharpest fall since early March overnight on an unexpected build in USA crude inventories last week.

In late May, Riyadh announced its plans to purposely reduce exports to the United States to force a reduction in the latter's sizeable inventories, which are preventing a greater rise in global oil prices, according to Saudi Oil Minister Khalid Al-Falih. USA light crude prices were at $46.12 US per barrel, downward $2.07 cents, or 4.3%.

  • Zachary Reyes