Oil Prices Rebound As EIA Reports Big Crude Draw

Oil Prices Rebound As EIA Reports Big Crude Draw

Oil Prices Rebound As EIA Reports Big Crude Draw

Oil prices fell on Wednesday, as rising output from Libya added to concerns about increasing US production which is undermining OPEC-led production cuts aimed at tightening the market.

Meanwhile, higher supply from Nigeria and Libya, which are exempt from a production-cutting deal, has fuelled concerns that the OPEC-led output cuts to reduce global inventories were being undermined by producers outside the deal.

"U.S. oil production has grown faster at [$50] than any analysts in the market predicted", Bjørnar Tonhaugen, vice president of Oil Markets at Rystad Energy, said in a statement.

Oil prices dropped almost 1 per cent in early Asian trade on Friday, dragged down by ongoing concerns over a global glut in crude supply despite a bigger-than-expected draw in U.S. crude inventories.

While OPEC and non-OPEC members are trying to draw down inventories, crude production has surged in the United States C-OUT-T-EIA, up 10 percent since mid-2016.

Russian Federation maintains its oil-price outlook at $50 to $60 on average for this year, Novak said.

"The deep-water cost curve is much higher, but over time that deep-water cost curve is coming down and over time that tight oil cost curve is going up a bit", Wood Mackenzie's Rodger said.

BlackRock global chief investment strategist Richard Turnhill expects oil prices to remain "range-bound" until supply reductions are confirmed. Lower oil prices have a negative impact on oil and gas producers' earnings.

A tank truck exits from the main gate of the Zawiya refinery and oil port towards the local market in Libya.

Oil prices have recovered after slipping to a three-week low in the previous session amid reports of a fall in U.S. crude stocks.

"We do not think that much, if any, of that tightening is now priced in".

But where traditional oil fields have failed, fracking has succeeded.

A report from ADP on private sector employment is expected to show that businesses created fewer than 200,000 jobs in May.

USA exports of petroleum products rose to 4.9 million bbl/d, and on average, exports are up more than 31% year-over-year.

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. Analysts said the move was an attempt by Beijing to strengthen the currency following a credit rating downgrade by Moody's. While US stockpiles have fallen for 8 straight weeks, American production and drilling continues to climb.

Saudi Arabia's oil demand and export levels are also worth watching.

OPEC and non-OPEC are making slow progress despite reported high levels of compliance with output cuts implemented from the start of 2017 and recently extended to the end of March 2018. It hit 9.34-million bpd last week, its highest since August 2015, according to the EIA. Oil markets are not convinced, at least not yet.

US crude and condensates output rose by 62,000 bpd month-on-month to nearly 9.1 million bpd in March ("Petroleum Supply Monthly", EIA, May 2017).

Saudi Arabia and Russia's oil ministers have tried to support prices by suggesting that they are ready to do whatever it takes to rebalance the market.

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