Oil prices fall on OPEC output increase, rising US crude stocks

"In 2018, we expect non-OPEC production to grow by 1.5million bpd which is slightly more than the expected increase inglobal demand". Traders will be watching figures on last week's USA stockpiles to be released later on Tuesday by industry group the American Petroleum Institute.

Oil prices fell around 1 percent on Wednesday after data showed a build in usa crude stocks and OPEC reported a rise in its production despite its pledge to cut back on output, according to Reuters.

Benchmark Brent crude settled 43 cents higher at $48.72 a barrel while US light crude settled up 38 cents to $46.46 a barrel.

Some traders still hope that Wednesday's readings from the USA government will show declining inventories for oil and gasoline, as numbers from the Energy Information Administration don't always match those from the API.

OPEC and 11 rival exporters including Russian Federation have agreed toextend an existing deal to limit supply by 1.8 million bpd toMarch 2018, in order to cut global inventory levels.

Those efforts thus far have largely not succeeded.

The rise has been driven by the oil price climbing back up after an initial deal by Opec and allies past year to cut production by 1.8m barrels of oil a day from January 2017.

Both contracts hit their lowest since May 5, driving them into technically oversold territory. The report said the market was rebalancing at a "slower pace".

Despite expectations of a drop in US crude stockpiles, fears of rising USA shale production are expected to continue to weigh on Opec and its allies' efforts to rebalance supply and demand in the market.

The world's oil glut is likely to persist next year in a blow to efforts by major producers to shore up the oil price by cutting output, according to a leading energy authority.

"By some accounts this increase is a troubling threat to OPEC compliance, but we note that it was driven by 352,000 bpd of additional supply from Libya and Nigeria", wrote Tim Evans, energy analyst at Citigroup.

Trade data show OPEC shipments to customers averaged around 26 million bpd in the last six months of 2016 and are set to average around 25.3 million bpd in the first half of this year.

"Should OPEC solve the problem of the overhang this year, it is just going to come back next year, so in any case their options are quite limited", said Mr. Weinberg. US light crude CLc1 was at $45.86 per barrel, down 22 cents.

Adding to the supply surplus is rising USA production from shale drillers that has pushed US output up by 10 percent over the past year to 9.3 million bpd, not far below levels by top exporter Saudi Arabia.

  • Zachary Reyes