Crude oil inventories again fell significantly, draining US stockpiles by more than 10 million barrels over the past two weeks, the Energy Department reported Thursday.
US production increased, and the expectation is that ongoing activity in USA shale will continue to boost output, offsetting OPEC efforts. And, this very steep growth comes with United States oil prices locked below the price most analysts estimated as a minimum to grow USA oil production.
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 USA output were undermining those cuts.
The Secretary-General of the Organisation of Petroleum Exporting Countries, OPEC, Dr. Mohammed Sanusi Barkindo, has said it is too early to say when production caps should be imposed on Nigeria and Libya.
Oil headed for its biggest weekly drop in four weeks as USA supply data signaled that OPEC's efforts to re-balance oversupplied markets need more time. "I don't think this is going to be the end of it, I see the draws increasing from here", Scott Shelton, energy specialist at ICAP in Durham, North Carolina said.
"Now that U.S. President Trump has announced that the U.S. will be withdrawing from the Paris Climate Agreement, it is expected that the U.S. will expand its oil production even more sharply", said analysts at German bank Commerzbank. Output could increase by about 1.5 million barrels a day next year, not much below the 1.8 million barrel-a-day cut implemented by Opec and its allies.
Late Tuesday, the American Petroleum Institute said crude oil inventories in the United States, the world's leading economy, declined by more than 8.6 million barrels, far more than the 3.2 million barrel draw forecast by S&P Global Platts earlier this week.
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The general trend among US producers points to a need to boost growth forecasts amid anticipated production acceleration the second half of this year, said consultancy Energy Aspects.
The bad news is USA crude production rose to 9.34 million bpd last week, up almost 500,000 bpd from a year ago.
Crude futures kicked off the week with slight gains, though downward pressure remains as many investors remain unconvinced that production cuts by Middle Eastern and Russian Federation producers are sufficient to offset accelerating output in the US and Africa.
Rising output from Nigeria and Libya is also undercutting the oil producers' attempt to limit production.
In its weekly rig-count report issued Friday, oil services group, Baker Hughes said 11 extra rigs were being used to look for oil last week taking the figure in total to 733.
"Sentiment is very poor and yesterday's survey from Reuters regarding OPEC production in May added to the scepticism about OPEC's capability to rebalance the market as quickly as hoped for", Commerzbank commodities analyst Carsten Fritsch told the Reuters Global Oil Forum.