Will OPEC Feud Harm Oil ETFs?

USA stocks of crude oil and gasoline surprisingly rose last week as refinery runs declined and exports fell, official data showed on Wednesday.

The price for Brent crude, the worldwide benchmark, slid more than three per cent, dropping $1.99 to hit $48.13 United States a barrel.

As of 1810 BST, front month West Texas Intermediate crude oil futures were down by 5.1% to $45.85 per barrel on the ICE.

Oil prices have dropped and continue to trade below $50 per barrel, as global crude markets continue to remain oversupplied although Middle East tension and declining USA inventories restricted the fall.

"Disappointed that the oil cartel and Russian Federation could not come up with a bolder plan to reduce the global crude surplus, market participants have been selling into every bounce", said Fawad Razaqzada, analyst at futures brokerage Forex.

According to a survey by Platts, crude production by OPEC member nations rose by 270,000 barrels a day in May, to 32.12 million barrels a day.

Oil prices slid hard on Wednesday on double-pronged concerns that the rift between Saudi Arabia and the other Gulf nations with Qatar, which began Monday, will wind up boosting output, and unexpectedly high USA inventories of crude and gasoline.

Futures fell as much as 4.7 percent in NY after the Energy Information Administration said American crude supplies rose by 3.3 million barrels last week, following eight straight weeks of declines. The American Petroleum Institute said on Tuesday crude inventories fell by 4.6 million barrels last week. Prices rose 79 cents to close at $48.19 Tuesday after declining 2 percent the previous two sessions.

Leading Arab powers including Saudi Arabia, Egypt and the United Arab Emirates cut ties with Qatar on Monday, accusing it of supporting Islamist militants and Iran.

Total gasoline inventories also increased by 3.3 million barrels last week, according to the EIA, and have moved above the upper limit of the five-year average range.

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.

By comparison, 24 countries including Saudi Arabia and Russian Federation made a pact in late May to keep 1.8 million barrels a day off the market through the first quarter of next year. "But if, as we have already seen, higher refinery runs and/or crude exports are the causes of these inventory drawdowns, then the impact on Opec's balancing act is actually negative". Royal Dutch Shell (RDSA) dipped 0.2%.

  • Zachary Reyes