Oil prices drop due to increased fuel inventories

Oil prices climb on stronger demand

On Tuesday, an EIA report showed that USA crude production rose by 59,000 barrels to 9.397 million barrels a day in the week ended July 7, which is the highest level in nearly two years.

However, OPEC's compliance with production cuts fell in June to its lowest since the deal with Russian Federation kicked in early in the year, according to the International Energy Agency.

Libya and Nigeria, which were spared from supply cuts because they are recovering from conflict, also opened the taps.

The supply-cuts deal is "working well", and there is no need to take further action at this time, al-Ghais said. "Each month something seems to come along to raise doubts about the pace of the rebalancing process", the Paris-based IEA said.

Nigeria and Libya were exempted from cuts agreed to by OPEC and other large producers in an effort to trim a global glut. During the same time a year ago, there were only 351 active rigs in the U.S.

This added to an IEA report raising its demand estimate. "We feel that the market is on the right way of correcting itself", he said.

The agency forecast non-OPEC supply would grow by a combined 2.1 million b/d over 2017 and 2018, led by the US. But at the same time the IEA warned that the current weak price for oil will eventually force a slow down in U.S. production. Output increased mostly in Libya, Nigeria, Angola, Iraq and Saudi Arabia, while production showed declines in Venezuela. Nevertheless, operators in US shale basins may be sitting on the sidelines with oil lingering in the mid- to upper-$40s.

It left its 2017 forecast unchanged on 9.33 million barrels a day, where U.S. production now sits.

That came despite a pledge by OPEC to curb production by about 1.2 million bpd between January this year and March 2018, while Russian Federation and other non-OPEC producers say they will hold back half as much.

After "lacklustre" oil demand growth in the first quarter, "there was a dramatic acceleration" in the second quarter, "due to a combination of expected increases in India, and some surprise additions in the U.S. and Germany", it said.

Brent crude futures settled up 49 cents, or about 1 per cent, at US$48.91 per barrel.

"As a serious member of OPEC, we stand ready to support the cuts when we are sure that we can have a stable predictable production", Kachikwu said.

The former minister highlighted the USA shale companies' ability to adjust to lower crude prices, reducing their breakeven costs by more than half to below $40 a barrel.

"OPEC reports global oil demand growth for 2017 is circa 1.27 million bbls per day to average 96.4 million bbls per day", PublicInvest Research said.

"Even if they disappoint their balance-of-the-year targets, they are still likely to show the double-digit percentage growth rates", the Barclays analysts said, referring to the American shale producers.

OPEC would hurt itself and help US shale producers if it adopted deeper cuts, the former oil minister of Qatar warned. DUC is shorthand for drilled, but uncompleted wells. Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse higher despite the fact traders remain net-long.

The weight of supplies has forced sellers to cut prices allowing Indian refiners to snap up cargoes in the spot market.

"We have to look at the sustainability and stability of production from those countries", said Al-Ghais, who also heads the technical committee.

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