Published: Thu, June 15, 2017
Business | By Pat Ferguson

US oil production seen thwarting OPEC effort to boost prices

However, rising USA production has stymied OPEC's efforts to rebalance markets.

The US central bank lifted the benchmark lending rate by a quarter percentage point and announced it would begin cutting its huge holdings of bonds and securities this year.

After holding steady in European trading, oil prices were subjected to heavy selling pressure and 5-week lows following the latest EIA inventories data.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $45.96 per barrel, down 50 cents, or 1.1 percent.

Oil prices tumbled to the lowest level in seven months Wednesday, as high oil inventories continued to erode confidence in the ability of major producers to ease a global supply glut. US gold futures gained 0.78 percent to $1,278.50 an ounce. August Brent crude on the ICE Futures Europe exchange lost $1.53, or 3.1%, to $47.19 a barrel.

Iraq, which had been the No. 2 seller to India for years, was able to overtake the Saudis as Indian refiners have implemented plant upgrades over the past couple of years, enabling them to process crude with a higher sulfur content.

Data from the U.S. Energy Information Administration (EIA) showed U.S. commercial crude oil inventories fell by 1.7 million barrels in the week through June 9.

Additionally, gasoline stocks rose by 2.1m barrels, compared with analysts' expectations for a 457,000 to 500,000-barrel drop, casting doubt on a rise in demand during the USA summer driving season.

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The IEA forecast an increase in non-OPEC output of 1.5 million barrels per day to 59.7 million bpd in 2018, with United States output to reach more than 14.1 million bpd.

OPEC's monthly report showed output from the group rose by 336,000 bpd in May to 32.14 million bpd, led by a recovery in Nigeria and Libya which are exempt from supply cuts.

Oil inventories are near record highs in some parts of the world, and producers outside the OPEC deal are increasing output.

With supplies plentiful, strong demand is needed to support the market, but there are signs of a slowdown.

"Our first outlook for 2018 makes sobering reading for those producers looking to restrain supply", said the report.

Oil is extending its slump below $50 a barrel amid speculation increasing USA supplies will counter production curbs by the Organization of Petroleum Exporting Countries and allies including non-OPEC member Russian Federation.

OPEC's plan to cut production and support prices is likely to be undone by increased output in the US, the International Energy Agency predicted Wednesday. "There is an improvement in global demand, but not enough to drive prices at this stage".

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