Crude drops for second straight week

Crude drops for second straight week

Crude drops for second straight week

Oil prices extended gains on Thursday after government data showed a larger-than-expected drop in USA crude inventories as refinery activity increased and crude imports fell.

Brent crude futures for July fell $1.53, or 3.0 percent, to settle at $50.31 a barrel on their last day as the front-month.

U.S. West Texas Intermediate crude futures fell 84 cents to $47.54 per barrel.

The latest data from the Energy Information Administration had US production averaging 9.3 million barrels a day, 6.3% higher than year-earlier levels.

Gasoline inventories, one of the products the crude is refined into, dropped by 2.86m barrels against expectations for a draw of close to 1.1 million barrels while distillate stockpiles unexpectedly rose by 394,000 barrels, compared to expectations of a 755,000 decline.

The Energy Information Administration will release USA crude stockpile and production data at 11 a.m. ET.

Rystad Energy is predicting that before the end of this year, monthly us oil production will top the record of 10 million barrels per day that was set in November 1970.

The U.S. almost broke oil production records in April 2015 when output hit 9.6 million barrels a day.

"If Opec wants to keep the market balanced next year, they will probably need to extend the production cut to all of 2018", Martijn Rats, managing director at Morgan Stanley in London, said by email.

"This could lead to a drilling free-for-all in the US and also see other signatories waver in their commitments", said Jeffrey Halley, senior market analyst, OANDA.

OPEC did discuss cutting its oil output by a further 1-1.5 percent when it met last week, three sources familiar with the matter told Reuters, and could revisit the proposal should inventories remain high.

The shale revolution has reshaped the global energy landscape, vaulting the U.S.to the upper echelon of oil producers behind only Russian Federation and Saudi Arabia.

On Friday, the head of Russia's state-controlled Rosneft oil giant said that that a rise in shale oil output in the USA would likely offset the effect from the OPEC and Russian production cuts.

Some commodity markets were also absorbing news that President Donald Trump said he would withdraw the United States from the landmark 2015 global agreement to fight climate change, a move that fulfilled a major campaign pledge but drew condemnation from U.S. allies and business leaders. Libya had been suffering technical glitches that held back production and is exempt from the current OPEC deal to remove 1.8 million barrels from the market per day.

Output in May increased from 315,000 barrels per day earlier month to 32.21 million.

"What we've seen is that a lot of the increase in domestic production has been accommodated by an increase in refining capacity, making the USA a major gasoline and diesel supplier to world markets", said Lipow.

But oil prices tumbled after the agreement was reached, as some had hoped for deeper cuts.

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