Oil dips on concern over rising U.S. output, OPEC tensions
- Author: Zachary Reyes Jun 12, 2017,
Jun 12, 2017, 14:41
Oil prices sank on Wednesday after the Energy Information Administration said US crude stocks rose 3.3 million barrels last week, deepening concerns that the continuing production cuts by the Organization of the Petroleum Exporting Countries and Russian Federation aren't effectively reducing the glut of oil that has suppressed prices for over two years.
During early trading, Brent crude jumped 32 cents to above $50 per barrel, while US West Texas Intermediate (WTI) saw a 34 cent increase to $48 per barrel.
The U.S. Energy Information Administration report on oil inventories is due this week on Wednesday at 10:30 a.m. EDT.
"This is the high demand season in the US and the market is expecting to see inventories decline", said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. Export demand fell by 370,00 barrels a day and total overall demand fell by 1.8 million barrels a day.
Oil has traded below $50 a barrel for the past couple of weeks amid speculation that rising USA output will counter supply curbs by the Organization of Petroleum Exporting Countries and its partners, including Russian Federation.
US crude production has averaged more than 9.3 million barrels a day for four straight weeks. More production from Iraq, as well as the boosts from Libya and Nigeria, do not augur well for a rebalancing of the crude market. The API estimated that U.S. crude oil inventories fell by 4.6 MMbbls (million barrels) between May 26, 2017, and June 2, 2017.
Brent crude prices were at $48.32 USA per barrel mid-morning Wednesday, down $1.80, or 3.6%. Royal Dutch Shell Plc lifted restrictions on exports of a key Nigerian crude halted for more than a year, potentially undermining the efforts of other OPEC members to clear a glut. Many analysts are concerned that increased production in the United States and other countries is maintaining high levels of global supplies.