Oil steady as high US output balances crude stock fall

Dhaka,  Sun,  24 September 2017
Published : 17 Aug 2017, 21:40:16
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Oil steady as high US output balances crude stock fall

Saudi Arabia’s June exports drop slightly
LONDON, Aug 17 (Reuters): Oil prices steadied on Thursday after US data showed a big fall in crude stockpiles but also an increase in production, taking US crude output to its highest in more than two years.

Brent crude LCOc1 was unchanged at $50.27 a barrel by 0845 GMT. US light crude CLc1 was 5.0 cents lower at $46.73.

Both benchmarks fell more than 1.0 per cent on Wednesday.

Energy Information Administration (EIA) data showed commercial US crude stocks C-STK-T-EIA have fallen by almost 13 per cent from their peaks in March to 466.5 million barrels. Stocks are now lower than in 2016.

But US oil output is rising fast as shale producers take advantage of a recent increase in prices.

US production jumped by 79,000 barrels per day (bpd) to over 9.5 million bpd last week, its highest level since July 2015, and 12.75 per cent above the most recent low in mid-2016. C-OUT-T-EIA

"The EIA data suggest the US oil market is becoming more balanced, with crude inventories falling," said Tamas Varga, senior market analyst at London brokerage PVM Oil Associates.

"But the big jump in production was the focus."

Rising US output has been undermining efforts by the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC producers including Russia to drain a global fuel glut.

They have promised to restrict output by a total of 1.8 million bpd between January this year and March 2018.

William O'Loughlin at Rivkin Securities said that if inventory declines continued at the current pace, US stocks would fall below the five-year average in two months.

"The pace of the declines indicates that OPEC production cuts are having an effect, although the current oil price suggests that the market is skeptical about the longer-term prospects for rebalancing of the oil market," he added.

Brent prices are down almost 12 per cent since OPEC and its allies began cutting production in January.

Oil producers have enjoyed years of rocketing demand, fueled largely by China's voracious thirst coming from over 2 million new car sales a month.

But this boom is coming to an end as its vehicle sales slow in a maturing market, and as cars become more efficient and start using alternative fuels.

"Gasoline consumption growth in China is set to see a marked slowdown over the coming years, due to macroeconomic headwinds, improving fuel economy and competition from alternative fuels," BMI Research said.

Another report from Khobar, Saudi Arabia adds: Saudi Arabia's crude oil exports in June fell slightly to 6.889 million barrels per day (bpd), 35,000 bpd lower than the May level, official data showed.

OPEC's biggest producer also pumped 10.070 million bpd in June, up 190,000 bpd from May, according to a posting on the Joint Organisations Data Initiative (JODI) website.

The kingdom increased direct-burn crude used for power generation in June as demand for electricity increases during the hot summer months. It used 680,000 bpd of crude oil to generate power in June, up 76,000 bpd from May.

The Muslim fasting month of Ramadan, when the use of electricity surges, ran from May 27 to June 25 this year.

Saudi demand for oil products rose to 2.634 million bpd in June, up from 2.535 million bpd in May.

The kingdom also continued to draw crude oil from its inventories, which fell by 2.253 million barrels to 256.55 million barrels in June. Saudi oil stocks peaked in October 2015 at a record 329.430 million barrels.

Riyadh is leading an effort by the Organisation of the Petroleum Exporting Countries (OPEC) and other producers to curb output and drain a global supply glut. OPEC's share of the cuts, which will run to March 2018, amount to about 1.2 million bpd. Non-OPEC producers agreed to cut half as much as that.

Saudi Arabia's production in June is only 12,000 bpd above its output target - 10.058 million bpd - under the OPEC deal.

Saudi's local refineries processed 2.577 million bpd in June, up from 2.517 million bpd in May. Its refined products exports rose to 1.362 million bpd in June from 1.279 million bpd in May.

Monthly figures are provided by Riyadh and other OPEC members to the Joint Organisations Data Initiative (JODI), which published them on its website.
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