API Reports 9.16 Million Barrel Inventory Draw, WTI Oil Price Edges Higher

Crude dips in Asia

Crude oil prices suffered a dual blow Monday from steady, though at times shaky, production recovery in Libya and from a report of an expected increase in USA shale oil activity. WTI crude oil for September delivery dropped $1.23, or 2.5%, to settle at $47.59 a barrel on the New York Mercantile Exchange.

Brent crude futures were at $51.07 per barrel at 0620 GMT, up 27 cents or 0.5 percent from their last close.

Crude prices fell on Tuesday-despite an export terminal closure in Libya on the back of worker protests-on weakening China demand.

Atkinson echoed other experts by reiterating the catch-22 facing the market when prices finally go begin to move upward: he said they will be "capped by the likelihood of more supply coming on stream from the U.S". Both Brent and WTI had reached two-month highs on August 10. But as the FT notes, Saudi Arabia-the lynchpin of OPEC and of this entire production cut strategy-exceeded its own targeted output for the first time last month, according to outside observers.

Analysts said the drop was steeper than expected, exacerbating concerns that a glut of refined fuel products could weaken Chinese demand for oil.

United States energy companies added oil rigs for a second time in the past three weeks, extending a 15-month drilling recovery, but the pace of additions has slowed in recent months as firms cut spending plans in reaction to declining crude prices.

Oil in NY has been unable to hold a rally above $50/bbl this month as investors concerns on rising global supplies outweigh cuts by the Organization of Petroleum Exporting Countries and its allies.

Oil prices had earlier on Monday been supported by reports that Libya's top oilfield had cut its output by 30 percent on security concerns.

US crude stockpiles likely fell for the seventh consecutive week, along with a probable fall in distillate and gasoline inventories last week, a preliminary Reuters poll showed.

Oil prices dipped on Monday as a slowdown in Chinese refining activity growth cast doubts over its crude demand outlook, while rising US shale output suggested supplies would likely remain high.

However, the outlook comes as crude output from the US has climbed in 9 of the last 10 months, and the IEA concedes that output in the Permean alone will rise by 64,000 barrels in September to a record of 2.5 million bpd.

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