Oil prices struggle on doubts OPEC can rein in oversupply

Efforts to combat the oil glut have not been helped by figures this week that showed Opec as a whole increased production in May because of higher output by Nigeria and Libya, which are not covered by the recent cuts deal. For distillate inventories including diesel, the EIA reported a rise of 328,000 barrels.

But those efforts have been blunted by a massive boom in production by USA shale operators, who have become much more efficient. The West's energy watchdog expects growth in supply of 1.5 million bpd in 2018, driven by non-OPEC producers like Brazil, Canada and the United States; that level would exceed expected demand growth of 1.4 million bpd.

OPEC's oil production jumped in May, despite the exporter group agreeing last month to extend its six-month deal to cap output into 2018.

In an effort to continue drilling, some oil businesses have taken on huge debt which will just put more oil in an oversupplied market, pulling down the price of commodities that they have to sell so as to manage the debt.

On the New York Mercantile Exchange, crude futures for July delivery fell 0.97% to $46.01 a barrel, while on London's Intercontinental Exchange, Brent eased 0.84% to $48.31 a barrel.

With global inventories still high and US output increasing, the decision by OPEC and Russian Federation to prolong their production cutback plans through March next year has come under fire.

OPEC's plan to cut production and support prices is likely to be undone by increased output in the USA, the International Energy Agency predicted Wednesday.

The measures helped stabilise oil prices at the beginning of the year, with the worldwide benchmark Brent crude sticking above $50 per barrel.

In their opinion, the truth is that the country's shale business now produces less than 5.5 million barrels per day or just 5.6 percent of the world's daily sum.

The US Energy Information Administration (EIA) said gasoline inventories increased by 2.1 million barrels during the week ended June 9, while crude inventories decreased by 1.7 million barrels.

"We have regularly counselled that patience is required on the part of those looking for the rebalancing of the oil market, and new data leads us to repeat the message", the IEA said. Inventories fell due to a rise in U.S. crude oil refinery demand to 17,256,000 bpd (barrels per day) on June 2-9, 2017. Supplies at the Cushing, Oklahoma, oil hub were down by 833,000 barrels.

  • Zachary Reyes