Crude Oil Prices Retreat as Markets Await US Inventory Data

Author

10 June, 2017

In other news, on Thursday, crude oil posted a two-sided trade, first rallying after official US data showed crude inventories fell sharply last week as refining and exports surged to record highs.

Reaction to the USA employment data could be significant for oil prices if the data is substantially away from consensus expectations of an increase around 180,000, although position adjustment into the weekend is likely to be a more important market factor.

Russia's Rosneft CEO Igor Sechin also said the market can not stabilize unless all producers cut output.

Oil prices fell to a three-week low on Wednesday with Brent set for its fifth monthly loss despite OPEC-led output cuts to reduce a global glut to try shore up prices.

Official government data showing weekly USA crude inventories will be published on Thursday.

U.S. West Texas Intermediate crude futures were up 78 cents, or 1.6%, at $49.10 a barrel. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation's biggest oil-storage hub, fell for a second week to 64.8 million barrels.

Certain OPEC members, such as Libya and Nigeria, and shale oil producer the United States are not part of the agreement, leaving room for further production growth from these exporters.

Global benchmark Brent crude futures were down 39 cents, or 0.77 percent, at $50.25 a barrel at 0039 GMT.

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Rising output from OPEC members Nigeria and Libya, which are exempt from the output reduction deal, is also undercutting attempts to limit production.

"Attention will be on USA inventory stocks tomorrow, with expectations of a further draw this week, following initial indications of strong demand for gasoline after the AAA said that driving mileage over the holiday weekend was the highest since 2005", said analysts at Cenkos Securities.

OPEC started the output cuts on January 1 in an attempt to ease bloated global inventories and boost oil prices. The next meeting of the ministerial monitoring committee under OPEC on oil production reduction may be held in Russia on July 22-24, Russian Energy Minister Alexander Novak told journalists.

Both Moscow and Riyadh said cooperation would continue beyond the current agreement as both countries were still trying to find ways to co-exist with United States shale oil producers, which are not part of the global output reduction deal.

Rystad Energy's vice president of oil markets Bjørnar Tonhaugen said: "US oil production has grown faster at 50 Dollars than any analysts in the market predicted".

Rising prices, which had tumbled from above $100 a barrel in 2014, have encouraged USA shale producers to increase drilling.

Crude inventories fell 6.4 million barrels in the week to May 26, far more than analysts' expectations for a decrease of 2.5 million barrels.


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