Oil falls on potential undermining of OPEC-led deal
- Author: Zachary Reyes Jun 13, 2017,
Jun 13, 2017, 7:23
US West Texas Intermediate futures were at $47.90 a barrel, up 24 cents, or 0.5 per cent.
Brent crude fell 76 cents, or 1.45 percent, to $51.53 a barrel by 1:00 p.m. EDT (1700 GMT), while USA light crude was 46 cents, or 0.9 percent lower at $49.34.
Post-settlement, prices pared some losses as data from the American Petroleum Institute (API) showed crude inventories fell by 8.7 million barrels in the week to May 26 to 513.2 million, compared with analysts' expectations for a decrease of 2.5 million barrels.
On Wednesday, a Reuters survey found output from the Organization of the Petroleum Exporting Countries (OPEC) rose in May, the first monthly increase this year, as higher supply from two states exempt from a production-cutting deal, Nigeria and Libya, offset improved compliance with the accord by others.
Before the start of trading in NY, the U.S. Energy Information Administration reported gasoline demand in March was down year-over-year for the third month in a row, suggesting some consumer factors may not be eating away at the supply-side strains.
Many are reportedly concerned that production cut-exempt Libya, Nigeria, and USA shale oil producers are undermining OPEC's agenda by ramping up production.
Standard Chartered (BSE: 580001.BO - news), however, said it expects global crude inventories will return to their five-year average by the end of the OPEC-led production cuts, with large drawdowns in the second half of 2017.
OPEC and non-OPEC members last week agreed to extend production cuts for a period of nine months until March, but stuck to production cuts of 1.8 million bpd agreed in November a year ago.
In order to accommodate the greater level of domestic demand, the Saudis usually produce more oil to keep exports (and revenues) steady.
Crude-oil futures veered heavily lower on Wednesday as markets already underwhelmed by Opec's recent output-curb extension now quit the asset on fears of surging Libyan production.
Oil prices are down some 9 percent since OPEC's May 25 decision to extend the cuts.
FXTM vice president of market research, Jameel Ahmad, said: "I maintain the viewpoint that the mindset of investors will remain tilted towards sell-on rally opportunities and I think traders are likely to continue entering selling positions around $50 as they have done for a number of months".