Oil Prices Slump on Overflowing Supply

Oil prices fell on Wednesday after industry data showed a build in USA crude stocks and OPEC reported a rise in its production despite a pledge to cut output.

The Energy Information Administration said Wednesday that gasoline inventories, one of the products that crude is refined into, unexpectedly rose by roughly 2m barrels against expectations for a decline of 457,000 barrels.

In the United States, which is not participating in any deal to reduce production, oil output has risen more than 10 per cent in the past year to 9.3 million bpd.

The International Energy Agency says it expects oil supplies next year to outpace demand, despite consumption hitting 100-million barrels per day for the first time.

As of mid-morning Wednesday, U.S. Brent crude was down $1.53 a barrel, or 3.1%, at $47.19.

Saudi Arabia's oil exports are expected to fall below 7 million barrels per day this summer, according to industry sources familiar with the matter, and Russian oil exports were seen as broadly flat in the third quarter, and yet prices continue to fall.

Oil has slumped despite output cuts of 1.8 million barrels a day by the Organization of the Petroleum Exporting Countries and non-OPEC producers including Russian Federation.

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"The revisions to non-OPEC supply growth have been much greater than the upward adjustments to world oil demand growth, accentuating the imbalance in the market", it said.

"Gasoline consumption is now about 5 percent lower than in the same week past year", Thomas Pugh, a commodities economist at London-based Capital Economics, said in a note.

Prices then came under pressure following the American Petroleum Institute (API) data with a headline build of 2.75 million barrels.

"Oil has been weighed down by the market's impatience with the generally slow pace of the global inventory drawdown amid a significant recovery in global oil supplies, particularly from the US", OPEC said in its June report today.

OPEC and 11 rival exporters including Russian Federation have agreed toextend an existing deal to limit supply by 1.8 million bpd toMarch 2018, in order to cut global inventory levels.

The oil research firm noted that the considerable drop in Brent futures prices, soon after the OPEC's meeting in May 25, this year, was mainly caused by an extension of the production cuts, and high level of speculation in the market.

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