Oil set for longest run of weekly losses since 2015 amid glut

18 June, 2017, 01:27 | Author: Brian Mcdaniel

The American Petroleum Institute reported crude inventories rose 2.8 million barrels last week while gasoline supplies increased by 1.8 million.

In November a year ago, when OPEC members agreed to cut production for the first time since the Great Recession, it was welcomed with great optimism and oil price jumped more than 20 percent, from $45 per barrel to as high as $55 per barrel (WTI).

Crude output from OPEC nations rose by 290,000 bpd in May to a 2017 high of 32.08 million barrels per day, according to the EIA.

Brent crude oil fell 30 cents to $46.70 a barrel, its weakest since May 5 and just above six-month lows, before recovering a little to trade around $46.90 by 1345 GMT.

It seems that oil inventories are particularly unpredictable as of late, with last week, the API and EIA reporting remarkably disparate figures in the amount of crude oil inventory movement-a 7.9-million-barrel discrepancy between the two that fanned the flames of an already shaky market.

As such, OPEC said, in its monthly report, "Although oil prices rebounded from five-month lows in (mid-May), following positive United States jobs data and assurances by Saudi Arabia that Russian Federation is ready to join OPEC in extending production adjustments to reduce a persistent supply glut".

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Opec and other exporters such as Russian Federation have agreed to keep production nearly 1.8 million barrels per day (bpd) below the levels pumped at the end of previous year and not to increase output until the end of the first quarter of 2018. Prices are down 1.6 percent this week.

"'Whatever it takes" might be the mantra, but the current form of "whatever' is not having as quick an impact as expected", the IEA said in a reference to Saudi Arabia's promise to do "whatever it takes" to rebalance oil supply and demand.

Under the deal to support the market, OPEC is curbing output by about 1.2 million bbl/d and Russian Federation and other non-OPEC producers are cutting by half as much.

OPEC members Nigeria and Libya are exempted from the oil curb deal, and have raised their production, which largely undermined the oil cartel's efforts to rebalance the market.

That means an entrenched market glut that has kept a firm lid on oil prices is likely to persist, despite disciplined efforts by most OPEC producers to rein in their own output.

China, the world's second-largest crude importer, reported industrial production for May rose a faster-than-expected 6.5% on year, and retail sales also gained a clip quicker at 10.7%, while fixed-asset investment came in at a less-than-seen 8.6%.

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