Oil prices drop as supplies increase
Oil prices fell on Wednesday, hit by rising supplies in the United States and expectations that producer group OPEC could relax voluntary output cuts.
Brent crude was down 30 cents at $75.58 a barrel by 1000 GMT. U.S. light crude was 15 cents lower at $66.21.
The Organization of the Petroleum Exporting Countries and some non-OPEC producers, including Russia, started withholding output in 2017 to reduce a supply overhang and prices have risen by around 60 percent over the last year.
The outlook for the oil market in the second half of this year is uncertain, analysts say, and OPEC argues there are downside risks to demand.
OPEC and other producers will meet on June 22-23 in Vienna to discuss future production.
“More oil from OPEC+ is the base case,” said Bjarne Schieldrop, analyst at Swedish bank SEB.
“Saudi Arabia and Russia have already started to lift production,” he said. “Unofficial sources have said Russia will propose to return production back to the October 2016 (level), i.e. removing the cap altogether over a period of three months.”
Lukman Otunuga, analyst at brokerage FXTM, said higher oil production and forecasts of more to come were already undermining prices:
“The prospect of easing supply curbs from OPEC-led producers continues to be reflected in oil’s overall depressed price.”
U.S. crude oil inventories rose by 830,000 barrels in the week to June 8, to 433.7 million, the American Petroleum Institute said on Tuesday.
Rising U.S. stocks partly reflect a surge in U.S. crude production
With output in Russia rising back above 11 million bpd in June and Saudi production climbing to more than 10 million bpd, supplies from the top three producers are increasing.
“With rising production from U.S. shale adding to oil’s woes and reviving oversupply concerns, further downside could be a possibility in the short to medium term,” Otunuga said.
Longer term, the market could tighten as demand increases if OPEC fails to cover supply shortfalls, the International Energy Agency said on Wednesday. [IEA/M]
The IEA said it expects global oil demand to grow by 1.4 million bpd this year and in 2019, to top 100 million bpd by the fourth quarter of 2018.
Official U.S. production and inventory data is due to be published on Wednesday by the Energy Information Administration.
Source: Reuters (Additional reporting by Henning Gloystein in Singapore; Editing by Jane Merriman and Dale Hudson)