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Oil prices under pressure from rising OPEC supplies

Oil prices under pressure from rising OPEC supplies

The EIA data showed that crude inventories dropped 6.4-million barrels, more than the 4.4-million-barrel drop forecast although a smaller drawdown that industry group the American Petroleum Institute's (API) report of a fall of 8.7-million barrels.

Global benchmark Brent crude futures fell to $49.93 a barrel, down 70 cents, or 1.38 percent, by 0630 GMT.

Refinery crude runs rose 229,000 barrels per day to 17.5 million bpd, surpassing its last peak at 17.3 million bpd in the week to April 21, and utilization rates increased 1.5 percentage points to 95 percent of nationwide capacity, data showed.

"Trump seems to be removing any barriers he can find that would obstruct growth of crude oil or natural gas", said Stewart Glickman, energy equity analyst at CFRA in NY.

Brent crude futures for August were up 63 cents, or 1.2%, at $51.39 a barrel during noon hour ET, after earlier rising to $51.44.

The cost of a barrel of crude slumped 2.4 percent, or $1.18, to $47.18 in electronic trading in NY on Friday, hours after Trump said the USA would immediately stop implementing the Paris deal.

President Donald Trump has vowed to provide extra support for US oil production and is widely expected to pull the United States out of a landmark global climate accord.

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US crude production has also continued to increase, rising to 9.34 million bbl/d, up almost 500,000 bbl/d from a year-ago.

While there are signs that an effort led by the Organisation of the Petroleum Exporting Countries (Opec) to curb production by nearly 1.8 million barrels per day (bpd) is starting to impact actual supplies, traders said ongoing increases in United States output were undermining those cuts.

Rising output from Nigeria and Libya, which are exempted from the deal, is also undercutting oil producers' attempt to limit production.

Similarly, on Friday, demand for bearish puts expiring in March 2018 spiked, indicating traders and investors are already protecting against a more aggressive drop in price once OPEC's joint supply deal expires.

The Organization of the Petroleum Exporting Countries and other producers including Russian Federation are trying to restrict output to drain stockpiles that are close to record highs in many parts of the world.

"A number of large-scale oil producers, that do not take part in these agreements, use such conditions to strengthen their market positions, and that leads rather to new imbalance than to the sustainable development", said Rosneft Chief Executive Igor Sechin, at an energy conference in St. Petersburg over the weekend.

"As these numbers are getting confirmed, the initial optimism about OPEC's temporary cuts, may turn to increasing skepticism about OPEC's choice of policy once the current output deal expires next year", says Bjørnar Tonhaugen, VP Oil Markets at Rystad Energy.

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