Oil prices fall on expected climb in U.S. production

Owen Stevens
April 25, 2017

U.S. West Texas Intermediate crude futures were also down 47 cents at $52.71 a barrel. In the oil patch, US drillers last week added rigs for a 13th straight week, a sign output gains there will continue.

Oil edged lower on Wednesday, after US data showed a smaller-than-expected decline in overall crude inventories coupled with another rise in production, hindering OPEC's efforts to reduce a global surplus of crude.

OPEC and other producers such as Russian Federation agreed to cut output by almost 1.8 million barrels per day in the first half of 2017 to drain a supply overhang that has persisted for nearly three years.

"Oil producers would need to extend the historic agreement to curb global overspply through and until the end of 2017 for oil prices to surge", CNBC reported, citing the bank's report, "amid concerns Russian Federation is lagging behind on its pledged production cuts".

According to a U.S. Energy Information Administration report, U.S. crude supplies fell 1 million barrels in the most recent week, a smaller decline than expected. Brent touched $54.76 intraday, its lowest since April 7.

Oil prices extended losses Wednesday as official data showed the first weekly climb in US gasoline supplies in two months.

Commercial crude oil inventories in the States on the other hand also fell, shrinking by 1.0m barrels to reach 532.3m barrels.

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"It seems that Aramco is preparing for the long shutdown of the Riyadh refinery by increasing production from other refineries as they need to keep some products in stocks while the refinery is closed", independent analyst Mohamed Ramady told Bloomberg from London.

This is while the USA total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 843,000 barrels per day, according to the report.

"Unless the [EIA] data shows something drastically different, this report should cause a severe dent in the bullish case [for oil prices]", said Sukrit Vijayakar, director of energy consultancy Trifecta.

USA markets remain heavily oversupplied, data from the American Petroleum Institute showed on Tuesday.

While compliance has been strong among OPEC countries, production cuts have lagged among other producers including Russian Federation.

The latest Chinese data recorded increased gasoline exports with a 2.5% annual gain for March to the highest level since April 2014.

Other reports by VgToday

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