Crude Oil Prices Fall Sharply, Very Negative Reaction To Inventories Data

Oil surges

Crude oil prices closed higher in futures market on Tuesday, ahead of a weekly USA government data that are expected to reveal a decline in crude supplies.

Brent crude futures were at $48.25 per barrel at 0039 GMT, down 47 cents, or 1 per cent, from their last close.

The rise for gasoline stockpiles contradicted expectations for a decline of between 500,000 barrels and 1.5 million barrels forecast by Citi Futures-and the decline for crude supply was smaller than expectations for a 2 million- to 3 million-barrel fall.

Adding to the supply surplus is rising US production from shale drillers that has pushed USA output up by 10 percent over the previous year to 9.3 million bpd, not far below levels by top exporter Saudi Arabia, Reuters reported.

Riyadh is leading an effort by the Organisation of the Petroleum Exporting Countries, Russia and other producers to cut output by nearly 1.8 million bpd until March in a bid to curb oversupply and prop up prices.

"The problem is that there is too much oil on the market".

But those efforts have been blunted by a massive boom in production by USA shale operators, who have become much more efficient.




OPEC's monthly report showed output from the group rose by 336,000 bpd in May to 32.14 million bpd, led by a recovery in Nigeria and Libya which are exempt from supply cuts.

OPEC stated, "The rebalancing of the market is under way, but at a slower pace, given the changes in fundamentals since December, especially the shift in US supply from an expected contraction to positive growth". Importantly, the IEA expected the increase in non-OPEC supply next year to be higher than the growth in overall global demand.

Total OPEC Members' proven crude oil reserves increased by 0.5 per cent to 1,217 bn b at the end of 2016, with a share of 81.5 per cent of total world crude oil reserves.

Also on Nymex, natural-gas prices were little changed ahead of Thursday's EIA update on supplies of the fuel, after a drop Tuesday to their lowest finish since mid-March.

Oil prices fell to their lowest in over five weeks following the US gasoline data and International Energy Agency (IEA) data projecting an increase in non-OPEC production. OPEC output rose in May as Libya and Nigeria revived production halted by attacks and political crises, a report from the group showed Tuesday.

The IEA has revised its forecast upwards for USA oil production this year, and said Brazil and Canada were also expected "to make further gains".

Iraq was the top crude supplier to India for a third month in May, shipping 1 million barrels a day, according to shipping data compiled by Bloomberg.

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