Oil market averts major breakdown, bounces aggressively off one-month low
Jun 12, 2017, 14:42
NEW YORK, June 7 (Reuters) - Oil prices slid more than 3.5 percent on Wednesday after the USA government reported an unexpected increase in inventories of crude and gasoline, fanning fears that output cuts by major world oil producers have not drained a global glut very much.
American benchmark West Texas Intermediate (WTI) lost 5 percent to reach as low as $45.78 per barrel - its lowest level since May 8.
According to the Energy Information Administration (EIA), US crude production averaged around 9m bpd in the first quarter, up almost 200,000 bpd from the previous quarter, and it is expected to reach a record 10m bpd next year.
"The OPEC agreement stands and is highly unlikely to change because of tension with Qatar. crude production in the Middle East and it will not change because of Qatar", said Oystein Berentsen, managing director for oil trading company Strong Petroleum.
Official inventory data from the EIA will be published later on Wednesday.
Oil prices rallied sharply during the USA session on Tuesday with WTI moving back above the $48.0 p/b level with anticipation that there would be a further decline in oil inventories.
Iran is the only OPEC member with room for growth under a current deal to stem production in an effort to balance the market.
An oil production platform in the Soroush oil fields alongside an Iranian flag in the Gulf July 25, 2005.
Oil prices fell about 1 per cent on Monday on concerns that the cutting of ties with Qatar by top crude exporter Saudi Arabia and other Arab states could hamper a global deal to reduce oil production. The declines in the global crude oil market also trickled down to the energy sector of the US stock market as the S&P 500 energy sector lost 1.8% in the trading session.
Crude futures came under additional pressure on Thursday from signs of rising output in Libya and Nigeria, two OPEC members exempt from production cuts.
Crude inventories rose by 3.3 million barrels (bbl) in the week ended June 2, compared with expectations for a decrease of 3.5 million bbl, the first such increase in 10 weeks. Export demand fell by 370,00 barrels a day and total overall demand fell by 1.8 million barrels a day.
July WTI crude oil is now trading inside its May range, but below a key technical retracement area that had been providing support for several days.
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