WTI Crude Oil futures slipped about 4 percent Wednesday, reaching a session low near $ 50 per barrel on ideas that rising global supplies would hit the commodity after its failure to sustain at one month high near $ 54 per barrel levels.
MCX Crude Oil futures also extended losses under Rs 3,400 per barrel and ended around Rs 3,340 per barrel, shedding about 2 percent on the day.
Data released Wednesday by the Energy Information Administration (EIA) showed that US commercial crude inventories decreased by one million barrels from one week ago, falling to 532.3 million. However, the EIA added that total motor gasoline inventories increased by 1.5 million barrels last week and are now near the upper limit of the average range.
Although the oil market will likely tighten throughout the year, overall non-OPEC production, not just in the US, will soon be on the rise again, noted the International Energy Agency (IEA). Even after taking into account production cut pledges from the eleven non-OPEC countries, unplanned outages in Canada as well as in the North Sea, the IEA expects production will grow again on a year-on-year basis by May.
For the full year, it sees growth of 485 kb/d, compared to a decline of 790 kb/d in 2016. The main impetus comes from the US where monthly data shows that output reached 9.0 mb/d in March, up from a trough of 8.6 mb/d in September 2016. The agency now expects that US production will be 680 kb/d higher at the end of the year than it was at the end of 2016.
It is now half time for the six-month oil production cuts agreed by OPEC and eleven non-OPEC countries. So far, the game has gone fairly well for producers. Prices have stabilised again recently after falling by about ten percent in early March, with recent unplanned outages and rising political tension in the Middle East playing a role.
For OPEC countries, compliance has been impressive from the start while non-OPEC participants are gradually increasing their compliance rate, although in their case it is harder for analysts to verify the data.
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Technical comment for the day: Crude Oil