Crude prices fall due to rise of U.S. crude stocks

Global oil and gas major BP Plc expects the crude oil price to stabilise at United States dollars 50-55 per barrel by the next year, rising from the current levels of about USD 45 per barrel.

NIGERIA's Brent crude price may increase by between $2 and $3 per barrel in the coming weeks, on the back of stable demand and low volatilities, a report by the global oil research firm S&P Global Platts, has predicted.

Both crude oil benchmarks have lost all the gains made at the end of previous year after the oil cartel agreed with other big producers to cut output in an effort to prop up prices.

The IMF in April had lowered its overall forecast of growth for the region, reasoning that the oil output deal would trim production of regional crude.

Oil prices dropped to six-week lows on Thursday, under pressure from high global inventories and doubts about oil cartel Opec's ability to implement agreed production cuts.

The US Government's Energy Information Administration has forecasted domestic output growth to 460,000bpd this year revising the earlier prediction of a decline of 80,000bpd in December. Such a move would have pushed the market into backwardation, when near-term prices are higher than those for later months, he said.

Despite its bullish outlook, the bank pointed to some bearish factors that may influence economic growth, such as volatility in oil prices and geopolitical events having a spillover effect into commodity and financial markets. The US production has also increased by 10% over the a year ago.

"They should have cut another million barrels a day for ninety days in order to drain the system", said Gary Ross, global head of oil at PIRA Energy, a forecasting and analytics unit of S&P Global Platts.

China, the world's second-largest crude importer, reported industrial production for May rose a faster-than-expected 6.5% on year, and retail sales also gained a clip quicker at 10.7%, while fixed-asset investment came in at a less-than-seen 8.6%.

Under the deal to support the market, OPEC is curbing output by about 1.2 million bbl/d and Russian Federation and other non-OPEC producers are cutting by half as much.

OPEC's own compliance with the cuts has been questioned, and the producer group said in a report this week that its output rose by 336,000 bpd in May to 32.14 million bpd.

In November a year ago, when OPEC members agreed to cut production for the first time since the Great Recession, it was welcomed with great optimism and oil price jumped more than 20 percent, from $45 per barrel to as high as $55 per barrel (WTI).

  • Zachary Reyes