Oil edges up towards data on reserves and production in US


In a report on Wednesday, the International Energy Agency said rising US output will contribute to supply growth exceeding demand growth in 2018.

Oil fell yesterday after reports showed global supply was rising and United States crude inventories were still increasing, raising concerns the market could stay oversupplied for longer than expected.

Distillate inventories fell this week by 1.451 million barrels, while inventories at the Cushing, Oklahoma, site fell by 833,000 barrels after last week's dip of 1.56 million barrels. OPEC said oil inventories in industrialized countries dropped in April and would extend a decline in the rest of the year, but a recovery in production in the USA was slowing efforts to get rid of excess supply. Production across OPEC rose by about 336,100 barrels per day to 32.1 million bpd, according to secondary sources, led by increases from Libya and Nigeria, which are exempt from the deal, and Iraq, CNBC reported.

Brent has dropped back below $50 since the OPEC meeting.

The dip in oil prices came on the heels of the projection by the International Energy Agency of an increase in production from non-members of the Organisation of Petroleum Exporting Countries.

The report also showed that gasoline inventories increased by 2.1 million barrels, compared to forecasts for a drop of 457,000 barrels.

Most forecasters are bullish about the outlook for oil demand growth in 2018.

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The implied erosion of OPEC's market share is unlikely to be sustainable, and following Stein's Law, it will stop. Lower crude oil prices impact oil and gas producers' profitability. The Standard & Poors Energy Sector Index showed a 2.1 drop, overall, with shares of Exxon Mobil falling by 1.4 percent, to hit $81.83; Chevron also fell by almost 2 percent, to hit $106.18. Even a fresh agreement in May, between the OPEC and participating non-OPEC producers, failed to lift price.

Shale firms have also benefited from plentiful funding from private equity investors with a relatively long-term view 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.

US crude was 50 cents lower at $45.96.

There may be an element of bravado in some of these claims which may exclude certain costs and apply only to the most productive wells in the most promising locations.

The dollar .DXY rose to its highest in more than two weeks, adding to the pressure on oil, as solid readings on the USA economy helped strengthen the case for the Federal Reserve to continue tightening monetary policy this year.