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Crude Oil Prices Fall Sharply, Very Negative Reaction To Inventories Data

At 511.5 million barrels, US inventories remain in the upper half of the average range for this time of year. IEA said its provisional monthly data for May indicates that OECD stocks may be little changed. BP PLC (BP.LN) (BP.LN) said its latest research report that global crude-oil production in 2016 (http://www.marketwatch.com/story/global-oil-output-in-2016-logged-slowest-growth-in-7-years-2017-06-13) saw its slowest percentage growth in seven years, as output from producers outside of OPEC marked its biggest drop in almost 25 years. The majority of non-OPEC countries registered substantial declines in their 2016 average crude production, as compared to 2015.

"For total non-OPEC production, we expect production to growby 700,000 bpd this year, but our first outlook for 2018 makessobering reading for those producers looking to restrainsupply", the IEA said.

While this would not affect global inventories, restricting the amount of oil coming into the U.S. should theoretically bring down inventories in the much-watched market, if it weren't for Iraq's increased oil exports to the US. Iraq also passed Saudi Arabia as the number one supplier to India, the fastest growing oil consumer.

The currency used to express re-balancing is the five-year average level of oil stocks.

In addition, USA crude stockpiles fell by 1.7 million barrels, less than the expected decline of 2.7 million barrels.

This is partly because Saudi Arabia usually burns more crude in power stations at home in the summer months to meet extra demand for power as people rely on air conditioners to deal with temperatures that can reach 50 degrees Celsius.




"Crude oil is still struggling to rebound", said Olivier Jakob, strategist at Petromatrix, adding that OPEC's gradual approach to rebalancing was giving US producers time to drill new wells that were undermining the impact of the group's cuts.

OPEC is working to ease supply strains with managed production declines, though strong USA production and output from parties within the OPEC framework are creating obstacles to the goal of a balanced market. Up next will be the EIA inventory report at 10:30 a.m. ET.

Benchmark Brent crude LCOc1 was 17 cents lower at $48.12 per barrel by 1236 GMT, reversing gains made earlier in the session when it edged up to $48.67.

The boost was prompted by the restoration of oil output in Libya and Nigeria, which are exempt from the OPEC agreement to cap production to stabilize prices.

OPEC added that crude oil inventories in industrialised countries dropped in April and would fall further in the rest of the year, but a recovery in United States production was slowing efforts to get rid of excess supply.

The cartel reduced its estimate of oil supply growth from producers outside the group this year to 840,000 bpd from 950,000 bpd, following the decision to extend the cut by nine months.

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