US oil production seen thwarting OPEC effort to boost prices

US oil production seen thwarting OPEC effort to boost prices

OPEC and 10 other countries led by Russian Federation agreed last week to extend for nine months, to March, a production cut of 1.8 million barrels a day initially agreed on in November.

In its regular Monthly Oil Market Report, OPEC said its May crude output pace rose by 336,000 barrels per day to just over 32.1 million.

American Petroleum Institute data highlighted a rise of 2.8 million barrels in the United States stocks in the week ending 9 June to 511.4 million.

Distillate inventories fell this week by 1.451 million barrels, while inventories at the Cushing, Oklahoma, site fell by 833,000 barrels after last week's dip of 1.56 million barrels.

"The numbers cast serious, serious doubt on whether there will be another hike this year", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY.

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The flow surge should show up in usa imports data sometime in late July.

With supplies plentiful, strong demand is needed to support the market, but there are signs of a slowdown. The rise has been driven by the oil price climbing back up after an initial deal by Opec and allies a year ago to cut production by 1.8m barrels of oil a day from January 2017.

Brent crude futures were at $48.51 per barrel at 0649 GMT, up 22 cents, or 0.5 percent, from their last close.

In some of parts of the world, the stocks of oil are on record highs, and producers who are not a part of OPEC deal are ready to increase output.

Global oil output will expand faster than worldwide demand for oil next year, primarily as U.S. producers rack up production, and that could hamper exporters' efforts to prop up prices, the IEA said on Wednesday (Jun 14). OPEC also lowered its estimate of oil supply growth from producers outside the group this year to 840,000 bbl/d from a previous forecast of 950,000 bbl/d, following the decision to extend the supply cut deal.

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Fesharaki, an expert in the energy market and an academic warned that the world may witness a drastic fall in price of a barrel of Oil to $30 if the OPEC failed to cut production.

"They're making a lot of headlines about reducing supplies but that's also right in their seasonal pattern of lowering exports in July, August because of domestic needs", he said. USA crude futures, meanwhile, were down 3.4 percent to $44.92 a barrel, the lowest intraday level since May 5.

The OPEC production figures were for 13 members and did not include Equatorial Guinea, which joined last month.

"We think this effectively takes September off the table", said Ian Lyngen, head of USA rates strategy at BMO Capital Markets in NY, in reference to the impact of the data on the probability of a September Fed rate increase.

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