Oil prices increase as OPEC output cut outweighs U.S. inventory rise

Cornelia Mascio
Febbraio 5, 2017

Oil Prices fell on Thursday after official data showed US crude and gasoline stockpiles rose sharply, although signs that OPEC and other producers are holding the line on output cuts helped support prices.

Feb 1 Russian Federation has cut its oil and gas condensate production in January by around 100,000 barrels per day (bpd), as concluded from the data provided to Reuters by two industry sources on Wednesday.

OPEC is scheduled to meet in June to review the effectiveness of the pact and the cartel could suggest extending the deal for more months.

The American Petroleum Institute (API) said late Tuesday that crude inventories jumped 5.8 million barrels at the end of last week, while distillate stocks rose 2.3 million barrels and gasoline supplies by 2.9 million barrels and stocks at Cushing fell by 900,000 barrels. That means the group as a whole is only about 60 percent of the way toward the production level it deems necessary to eliminate a global oversupply and raise prices.

According to the Energy Information Administration's latest forecast, US crude-oil production will expand from an average of 8.9 million barrels a day in 2016 to 9.3 million barrels a day in 2018, "primarily as a result of gains in the major USA tight-oil producing states".

About 617,000 barrels of oil, 50,800 barrels of condensate and 24,200 barrels of oil products were daily exported, according to the ministry. In terms of OPEC, he said the cuts won't affect United States inventories until at least February, probably later. The Bloomberg News survey may vary from the independent estimates compiled by OPEC known as the secondary sources, which are the basis of the accord. Later, non-OPEC countries agreed to cut the output by 558,000 barrels per day during the meeting held December 10, 2016. The dollar traded at 113.28 yen during Thursday's Asian session, down from Wednesday's high of 113.95, while the euro showed a slight rebound off Wednesday's low, trading at $1.08125 on Thursday. US stockpiles almost doubled expectations, as analysts expected an increase of 3.3 million barrels.

"There's very high confidence in the market that OPEC is going to help drive inventories gradually lower through the first half of the year", said Mr. Schieldrop. While the organization has the option to prolong the deal, some members, including leader Saudi Arabia, have said an extension may not be necessary. However, Russia has said its planned output reduction would be gradual. Russian Energy Minister Alexander Novak said that the country reduced its oil production by 117,000 bpd. In the organized cuts in 2008, OPEC's compliance rate stood at 70 percent, according to Hasan Qabazard, OPEC's former head of research.

Non-OPEC oil supply previous year was buoyed by "higher-than-expected growth in Norway, Russia and the United States", OPEC said.

OPEC and non-OPEC producer Russian Federation, however, are shielding Asian customers from those supply cuts and instead have reduced deliveries to Europe and the Americas.

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