Oil Mixed After Producers Declare Qatar Rift

Oil prices bounced around low levels in choppy trading today, with Brent crude holding below US$50 over concerns that a political rift between Qatar and several Arab states would undermine efforts by Opec to tighten the market.

By 2:00pm GMT prices slipped one percent, with Brent falling to $49.49 and WTI to $47.25 per barrel. The agency cut its 2018 forecast for West Texas Intermediate crude, the USA benchmark, by 2.7 percent from May.

The EIA also reported increases in gasoline and distillate supplies at a time when gasoline inventories normally fall because of, what the IEA reports, was a drop in total oil demand.

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.

The EIA left its forecast for this year's production unchanged at 9.3 million barrels a day.

With a production capacity of about 600,000 barrels per day, Qatar's crude oil output is one of oil cartel Opec's smallest. The American Petroleum Institute was said to report late Tuesday that stockpiles of the motor fuel increased by 4.08 million barrels last week.

US gasoline futures fell 4 percent to $1.49 a gallon, the lowest point since May 10, again due to rising inventories.

USA crude production has jumped over 10 percent since mid-2016 to 9.34 million barrels per day (bpd), levels close to top producers Russian Federation and Saudi Arabia.

The spat adds to other doubts about whether the agreement can support prices, including rising production from countries exempt from the agreement - Libya and Nigeria.

Output will average 10.01 million barrels a day next year, topping the previous high of 9.6 million in 1970, according to the Energy Information Administration's monthly Short-Term Energy Outlook.

Last year OPEC announced a momentous deal between its member nations and some non-OPEC producers to reduce their oil output.

Government figures revealed that United States oil and product stockpiles jumped last week, wrong-footing traders who had been expecting a drop in crude inventories. The supply cut deal championed by Saudi Arabia targeted a reduction of 1.2 million barrels per day.

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.

  • Zachary Reyes