Oil prices remain level on OPEC's assurance to rebalance crude market

Paterniano Del Favero
Aprile 30, 2017

USA shale production in May is likely to post the biggest monthly gain in more than two years, government data showed on Monday, as producers step up the pace of drilling with oil prices holding above $50 a barrel.

The incessant rise of rigs has led the Energy Information Administration to upgrade its United States oil production forecast for 2018 from 9.73 million barrels per day (bpd) in its March report to 9.9 million bpd in its latest report.

Gasoline stocks posted a counter-seasonal build of 1.5 million barrels, despite heavier refining activity.

US West Texas Intermediate (WTI) crude futures were also down 4 cents at $52.61 a barrel.

All oil producers taking part in a supply-cut pact are committed to bringing global inventories down to the industry's five year average and restoring stability to the market.

USA crude oil production rose to 9.25 million barrels per day, official data showed, up nearly 10 percent since mid-2016.

Traders said that the rising USA crude production posed a concern that the oil supply overhang would continue, while the jump in gasoline stocks implied a stutter in demand.

USA supplies of crude are still near records and more than 100 million barrels higher than the five-year average for this time of the year, data compiled from the EIA show.

Patrick Pouyanne, the chief executive of French oil and gas giant Total, said on Thursday prices could fall again by the end of the year due to a rapid increase in US shale production. "The U.S. has increased production by about 600,000 barrels a day since the OPEC agreement, mitigating their cuts".

Oil prices were resilient in an immediate reaction to the data before dipping lower.

Oil edged higher on April 19 as OPEC said it was committed to eroding a global surplus of crude, but increasing shale production in the USA and still-high global stocks threatened to pull prices lower. Inventories are at record highs.

Brent futures were up 15 cents to $53.08 a barrel were at 11:40 a.m. EDT (1540 GMT).

The gain pushed gasoline stockpiles to 237.7 million barrels in the week ended April 14, leaving them 21 million barrels higher than average for the date over the last 10 years.

More barrels could be on their way to market from USA shale fields as financial companies are investing billions in production, a Reuters analysis shows.

Recently, OPEC members, including Saudi Arabia, have expressed a desire to extend the global deal to cut oil supply for an additional six months beyond June.

There was also some vague optimism that OPEC would extend production cuts following rhetoric by Kuwait and Saudi Arabian officials, although sentiment remained cautious.

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