Crude oil futures fall 0.35% after global cues weaken

Oil prices dipped to a seven-month low last week following new reports from the US government showed a lesser than expected weekly decline in domestic supply and production and a rise in overall crude production and gasoline stockpiles. Despite the reduction in production from oil producers, the level of exports is still high as many tanker-tracking data showed.

- Reuters picLONDON, June 20 ― Oil prices steadied just above seven-month lows today after news of increases in supply, a trend which has undermined attempts by Opec and other producers to support the market through reduced output.

US oil production has been rising quickly this year, feeding the global glut.

Opec supplies actually jumped in May as output recovered in Libya and also Nigeria, two countries exempt from the production cut agreement.

The US Energy Department noted that oil production, which averaged 8.9 million barrels a day last year, will rise to 9.3 million barrels a day this year. Since May 25, when the Opec opted to roll over a 1.8 million barrel per day output cut for another nine months, crude prices have fallen about 12 per cent.

"Implied crude production seems to have moved upwards at a rather rapid pace, United States gasoline demand has taken a turn to the downside just as the summer driving season starts and total United States oil stocks have not drawn for two weeks". They declined 54 cents or 1.2 per cent in the previous session, to settle at $44.20 per barrel, the lowest close since November 14. The largest increase is expected from Brazilian and OPEC production increases in the second quarter of 2018.

"We're seeing more tankers used for storage and more crude from West Africa and Europe being offered into the U.S. Gulf Coast at the same time the Gulf Coast has been an exporter of light sweet crude", said Andrew Lipow, president of Lipow Oil Associates in Houston. There does not seem much prospect of the even deeper cuts that would be required to bring down inventories by March - Iran, Iraq and Russian Federation in particular are unlikely to sign on.

Brent crude futures were down 16 cents at.21 per barrel at 0841 GMT. The global benchmark crude traded at a premium of US$2.48 to August WTI. The restart of key oilfields in Libya led to the rise in crude oil production. Overall compliance to the deal has been unprecedentedly good - hovering around 90 per cent for the Opec members, helped by Saudi over-compliance.

The oil market has started showing signs that it is headed in the right direction, and current expectations point to the market returning to balance in the fourth quarter this year, Saudi Oil Minister Khalid al-Falih told London-based Arab daily Asharq al-Awsat in an interview published on Monday.

  • Zachary Reyes