Oil Tumbles Most in Six Weeks as U.S. Gasoline Supplies Advance

21 April, 2017, 19:49 | Author: Leticia Walters

Last November, OPEC members along with non-OPEC countries such as Russian Federation have agreed to reduce their daily output by 1.8 million barrels during the first half of this year in a bid to end the global supply glut.

US crude oil production rose to 9.25 million barrels per day, official data showed, up nearly 10 percent since mid-2016. "The U.S. has increased production by about 600,000 barrels a day since the OPEC agreement, mitigating their cuts". One factor helping boost stocks has been USA crude production, which has climbed by 482,000 b/d this year. The industry body American Petroleum Institute had reported an increase of 2.254 million barrels in gasoline inventories on Tuesday, setting the stage for crude's slide.

A surprise build in U.S. gasoline stocks last week triggered a sharp sell-off across the oil complex Wednesday, even though weekly USA inventory data also showed draws in both crude and distillate inventories. Opec exempted Nigeria and Libya past year from cutting production, due to their internal conflicts, while it agreed to let Iran pump an additional 90,000 barrels a day to reach output of about 3.8 million. In the past nine weeks, the growth has reached 30,000 barrels per day. US crude futures were down 5 cents at $50.39 a barrel.

Global benchmark Brent crude futures swooned as low as $54.61, the lowest since April 7, then settled down 47 cents at $54.89 a barrel.

Still, Saudi Arabia's energy minister has said it was too early to discuss an extension.

U.S. gasoline stocks posted a counter-seasonal build of 1.5 million barrels, because of rising refining activity.

Volumes were thin, with about 152,000 Brent futures contracts and about 296,000 WTI contracts changing hands, less than half of Thursday's trading volumes.

May output is expected to rise by 123,000 barrels per day to 5.19 million bpd, according to the U.S. Energy Information Administration's drilling productivity report.

Opec and other major producers are committed to reducing oil stockpiles, and all countries participating in a six-month deal to pare output are committed to restoring the market's stability.

"With a continuation of the Opec and non-Opec producer deal in the second half of 2017 and the expected associated inventory draw-down, we expect oil prices to move above $60 a barrel by the second half of the year", the analysts wrote in the note.

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