Crude oil prices ease on prospects of higher world supplies

04 June, 2018, 09:59 | Author: Teresa Adams
  • Comex Gold

OPEC's oil production dropped in May by 70,000 bpd to 32.00 million bpd on the back of outages in Nigeria and a continuous decline in Venezuela that dragged the cartel's total production to the lowest level since April 2017, according to the monthly Reuters survey.

In New York, July West Texas Intermediate crude fell $US1.23, or 1.8%, to settle at $US65.81 a barrel-the lowest finish since April 10.

For the week, WTI is on track for a 1.5% fall, adding to last week's almost 5% decline, while Brent is set to rise 1.3%, widening the spread between the two benchmarks.

But despite the differential as well as substantial recent losses for both benchmarks, at least one analyst believes there is something else to consider, namely the idea that prices won't keep falling because it will be tough for even record-breaking USA output to meet global demand.

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At 434.5 million barrels, US crude oil inventories are in the lower half of the average range for this time of year.

US crude oil refinery inputs averaged about 17.2 million barrels per day during the week ending May 25, or 527,000 barrels per day more than the previous week's average.

U.S. futures prices ended last week at their lowest finish since April on the back of rising production and the possibility that OPEC and its allies may decide to boost output, but the price of the global marker crude, Brent, edged higher.

US crude production has been rising to record levels since late a year ago. Surging output and a lack of pipeline capacity in the prolific Permian Basin shale play in Texas is exacerbating swelling USA inventories. It was still set to rise 0.5% for the week.

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Global benchmark Brent fell 77 cents to US$76.79 a barrel.

Prices have fallen sharply in the past week amid expectations that OPEC will ramp up production, as well as a stronger dollar. But without adequate transportation to get crude to the coasts, "we're going to continue to see some weakness in WTI", he said.

The Houston-based oilfield services company Baker Hughes reported on Friday that there were now 861 rigs drilling for oil in the United States with more than half of them - 477 - situated in the western Texas Permian Basin. That was the eighth time drillers have added rigs in the past nine weeks.

The speculator group cut its combined futures and options position in NY and London by 50,937 contracts to 370,980 during the week.

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In addition, Russian Federation and a number of other non-OPEC producers agreed to reduce their crude oil production by an additional 600,000 barrels per day, Kallanish Energy reports.

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