Oil prices fall with rising global glut concerns

Sheik Tamim bin Hamad Al Thani Emir Qatar

The U.S. Energy Information Administration (EIA) said on Tuesday U.S. crude oil production C-OUT-T-EIA could hit a record 10 million bpd next year, up from 9.3 million bpd now and nearly equaling top exporter Saudi Arabia.

August Brent crude also fell down 1% or 48 cents closing in at $49.47 per barrel which was the benchmark's lowest settlement in the past month.

Oil futures were down Wednesday over concerns over rising US production ahead of weekly stockpile and output data from the Energy Department.

Crude inventories USOILC=ECI rose by 3.3 million barrels in the week ended June 2, compared with expectations for a decrease of 3.5 million barrels, the Energy Information Administration said. US crude was down 1% to $47.73 per barrel.

USA crude production has ranged by around 9.3 million barrels a day in the past four weeks which is probably why the government will be expecting production to reach 10 million barrels a day by next year.

BP (BP) shares fell 1%.

In parallel, gasoline inventories jumped by 3.3m barrels (consensus: 0.6m), while those of distillates did so by 4.4m barrels.

Oil tumbled to its lowest in four weeks as an unexpected increase in US crude and gasoline stockpiles stoked fears that the global supply glut will remain unabated.

The EIA, instead of reporting what was expected to be the ninth straight drop in USA crude oil inventory, reported a 3.3-million-barrel increase in supply. According to data from Reuters, that's almost eight per cent below its open on 25 May, the day the Organisation of the Petroleum Exporting Countries (Opec) and other producing nations agreed to extend oil output cuts through the first quarter of 2018.

Back in the day, an attack in Iran and tension between OPEC members Saudi Arabia and Qatar might have dominated.

The United States has begun importing Iraqi oil at a rate of 1.1 million barrels per day to replace export cuts announced by Saudi Arabia late last month, new figures compiled by Bloomberg show.

Both Brent and United States crude are about 10 percent below their open on May 25, when OPEC, Russia, and other producers agreed to extend oil output cuts to the first quarter of 2018. Some were concerned about rising production from Libya and Nigeria, which are exempt from the agreement.

"The OPEC agreement stands and is highly unlikely to change because of tension with Qatar", said Oystein Berentsen, managing director for oil trading company Strong Petroleum. That's up from 9.96 million barrels projected in May. American production has expanded to 9.34 million barrels a day, according to the EIA.

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