Oil prices tank to November levels on unexpected rise in United States inventories

Jun 12, 2017, 14:44

The EIA, instead of reporting what was expected to be the ninth straight drop in USA crude oil inventory, reported a 3.3-million-barrel increase in supply.

The US benchmark, West Texas Intermediate (WTI), was down 0.81 per cent at $47.80 a barrel.

With production capacity of about 600,000 barrels per day (bpd), Qatar's crude output is one of OPEC's smallest but tension within the Organization of the Petroleum Exporting Countries could weaken the supply deal, aimed at supporting prices.

U.S. crude inventories probably dropped by 3.5 million barrels last week, a ninth straight decline, according to a Bloomberg survey before the release of data from the Energy Information Administration on Wednesday.

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Analysts generally attributed the price increase to concerns over supply disruptions in the region, but it should be pointed out that despite the market reaction, the actual impact of the Middle East rift on the global oil supply situation will be limited.

Investors are watching for the official data to be released by the EIA on United States stocks. Analysts expect a 3.5 million barrel decline in inventories.

According to a survey by Platts, crude production by OPEC member nations rose by 270,000 barrels a day in May, to 32.12 million barrels a day. Crude slid to its lowest level since May 9, with US benchmark futures down more than 10 percent in 10 days of trading.

Latest data show that US oil producers activated more oil rigs in the week ended June 2.

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There are already doubts that the effort to curb production by nearly 1.8 million bpd is seriously denting crude exports.

With production in these countries expected to continue to grow this summer as they recover from militancy-related outages, OPEC faces a tricky period in its attempt to accelerate the market's rebalancing.

According to traders Brent crude oil futures were at $50.21 per barrel on Monday - an increase of 26 cents, or 0.5 percent.

Still, the EIA reports that the United States remained the world's top producer of petroleum and natural gas hydrocarbons in 2016 for the fifth straight year despite production declines for both petroleum and natural gas relative to their 2015 levels.

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Brent crude prices were at $48.20 per barrel, down 3.8 percent, or $1.92 a barrel. Many OPEC member-nations ramped up production a year ago ahead of the production cuts so that they would have oil to sell when the production cut gets underway.

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