Stockpiles Fall Less Than Expected, Oil Prices Drop

Oil resumed its decline as industry data showed USA crude stockpiles extended gains, exacerbating an inventory overhang.

Data from the U.S. Energy Information Administration showed that domestic-crude supplies fell by 1.7 million barrels for the week ended June 9.

"OPEC 2017 year-to-date exports are only down by 0.3 million barrels per day (bpd) from the October 2016 baseline", analysts at AB Bernstein said.

Gasoline stocks, however, rose by a surprise 2.1 million barrels, against an expectation of a 457,000 gallon drawdown as Americans spend more time travelling to vacation destinations around North America.

SINGAPORE, June 16 Oil prices edged up on Friday but remained near six-month lows, held down by an ongoing supply overhang that persists despite an OPEC-led effort to cut production and prop up crude markets.

Oil has declined nearly 8 percent this month amid speculation that rising U.S. supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies, including Russian Federation. Brent futures are trading at higher prices for further-dated contracts, which is an encouragement for more production rather than less.

"If prices drift toward US$40 (RM171.28) a barrel, there is likely to be some sort of reaction from Opec".

"We've been running at historically high levels on the refinery side, which is pushing out more product".

While this would not affect global inventories, restricting the amount of oil coming into the U.S. should theoretically bring down inventories in the much-watched market, if it weren't for Iraq's increased oil exports to the US.

But it said slowing demand growth in China and Europe in particular, as well as increasing supply, meant the deficit should narrow to 500,000 bpd from a prior estimate of 700,000.

The country's oil production stood at 3.796 million bpd in the first quarter of 2017, rising from 3.741 million bpd in its previous quarter, according to the OPEC's report.

Then on Wednesday, the International Energy Agency said in a report that output growth among non-OPEC members such as the US would outpace the increase in demand.

The EIA expects United States oil production to continue towards 9.3 barrels per day in 2017 and almost 10.0 million barrels per day in 2018.

Crude output from OPEC nations rose by 290,000 bpd in May to a 2017 high of 32.08 million bpd, still within the confines of the supply deal, after comebacks in Libya and Nigeria, which are exempt from cuts.

  • Zachary Reyes