June 19, 2018, 8:10 pm
Facebook iconTwitter iconYouTube iconGoogle+ icon

Oil drops on prospect of rising supplies

SINGAPORE- Oil prices fell on Wednesday, pulled down by rising supplies in the United States and expectations that voluntary output cuts led by producer cartel OPEC could be loosened.

Brent crude futures, the international benchmark for oil prices, were at $75.65 per barrel, down 23 cents, or 0.3 percent, from their last close.

US West Texas Intermediate (WTI) crude futures were at $65.99 a barrel, down 37 cents, or 0.6 percent, from their last settlement.

The Organization of the Petroleum Exporting Countries (OPEC), together with some non-OPEC producers including Russia, started withholding output in 2017 to reduce a global supply overhang and push up prices.

OPEC on Tuesday said that the oil market outlook in the second-half of 2018 is highly uncertain and warned of downside risks to demand. 

The group is due to meet on June 22 in Vienna, Austria, to discuss future production policy.

“The prospect of easing supply curbs from OPEC-led producers continues to be reflected in oil’s overall depressed price action,” said Lukman Otunuga, analyst at futures brokerage FXTM.

In the United States, the American Petroleum Institute (API) reported on Tuesday that crude oil inventories rose by 830,000 barrels in the week to June 8, to 433.7 million. 

The rising stocks are in part a result of the surge in US crude oil production, which has jumped by 28 percent in the last two years, to a record 10.8 million barrels per day (bpd).

With output in Russia rising back above 11 million bpd in June and Saudi production climbing back above 10 million bpd, supplies from the top three producers are increasing.

“With rising production from US shale adding to oil’s woes and reviving oversupply concerns, further downside could be a possibility in the short to medium term,” Otunuga said.

Official US production and inventory data is due to be published on Wednesday by the Energy Information Administration (EIA).

OPEC, Russia and other non-OPEC producers have been cutting output since January 2017 to get rid of excess supply and boost prices. The deal’s goal was originally to reduce inventories in developed nations to that of the five-year average.

In a report on Tuesday, the OPEC said inventories in April fell to 26 million barrels below the five-year average. That’s down from 340 million barrels above the average in January 2017.

With oil hitting $80 a barrel this year, the highest since 2014, Saudi Arabia and Russia are discussing raising output. But Iran disagrees and Iraq has voiced restraint, pointing to a tough policy meeting on June 22-23 in Vienna.

OPEC in the report was cautious on the outlook for the rest of 2018, citing a faster-than-expected rise in non-OPEC oil production and the chances of global demand weakening.

“Recent developments in the oil market have led to pronounced uncertainty about the second half of the year,” OPEC said in the report.

“While oil demand in the US, China and India shows some upside potential, downside risks might limit this potential going forward.”

Oil pared an earlier decline after the report was released trading just above $76 a barrel.

While the main goal of the supply deal was to reduce oil stocks to the five-year average, ministers have said other metrics should be considered, also suggesting they are in no hurry to end supply cuts.

The report said OPEC members were still cutting much more than needed, even though output in May rose slightly and top exporter Saudi Arabia is boosting supply.

OPEC output climbed by 35,000 barrels per day to 31.87 million bpd, OPEC said, according to figures it collects from secondary sources. That is almost 900,000 bpd less than the amount OPEC says the world needs from the group this year. - Reuters
Rating: 
No votes yet

Column of the Day

When body language speaks volumes

By ABIGAIL VALTE | June 19,2018
‘Whichever side you are on, it’s difficult to deny that the photo of Robredo put down Duterte in many, many ways, though inadvertently.’

Opinion of the Day

KOWTOWING

Rey O. Arcilla's picture
By REY O. ARCILLA | June 19, 2018
‘I believe what Digong’s detractors really mean and want is that they’d rather the country went back to kowtowing to the US.’