Oil drops, roiled by bearish USA crude inventory report

Posted June 15, 2017

With US oil and gas companies already stepping up activities in 2017, crude output climbed in May - the same month OPEC met to extend its production cuts - to a six-month high, since November 2016, according to OPEC's latest Monthly Oil Market Report.

In its regular Monthly Oil Market Report, OPEC said its May crude output pace rose by 336,000 barrels per day to just over 32.1 million.

Inventories rose by 2.75 million barrels in the week to June 9 to 511.4 million, according to the American Petroleum Institute report, compared with expectations for a decrease of 2.7 million barrels. Distillate inventories were the only one, which saw a fall of 1.451 million barrels.

Russian compliance with the first round of cuts was slow, and there is skepticism that Moscow will offer aggressive compliance this time, particularly if the cuts look inadequate to change market conditions.

Meanwhile, the EIA has reported that shale production in the USA would reach an all-time high in July, at 5.475 million bpd and adding an additional rig to bring the total rig count to 719, continuing the twenty-two-week streak. But it said slowing demand growth in China and Europe in particular, as well as increasing supply, meant the deficit should narrow to 500,000 bpd from a prior estimate of 700,000. For one, higher-than-expected shale oil production in the United States partly offset Opec and non-Opec production cuts at the beginning of this year.

Lloris wary of Sweden threat
Sweden did get the match back on level terms though before halftime when Jimmy Durmaz tied it at 1-1 two minutes before the break. With so much talent at their disposal, most people just assumed France would qualify easily for the tournament.

US crude futures fell by 1% to trade at $45.97 a barrel after the report was released.

The production cuts have been extended for another nine months.

Some traders still hope that Wednesday's readings from the US government will show declining inventories for oil and gasoline, as numbers from the Energy Information Administration don't always match those from the API. In contrast, China's imports from fellow Opec member Angola jumped 13.3% and those from allied producer Russian Federation gained 8.1%.

Despite OPEC and other producers curbs to production, oil stocks are near record highs in some regions of the world, while OPEC members exempted from the oil deal continue to increase production. With this, despite a pledge to cut output, the OPEC also reported a rise in its production. "It's a huge resource, it's changed everything", said Gary N Ross, global head of oil at energy analysts Pira, of USA shale. Prices have averaged higher so far this year, at around $51.8 a barrel.

The IEA has revised its forecast upwards for USA oil production this year, and said Brazil and Canada were also expected "to make further gains".