Total liquid fuels inventories back to normal in US, OECD

Total liquid fuels inventories back to normal in US, OECD

U.S. crude oil inventories decreased in the week to May 25, the U.S. Energy Information Administration (EIA) said in a report on Thursday. Prices have dropped about 5 percent since Saudi Arabia and Russian Federation last week proposed to phase out supply curbs by OPEC and its allies, a decline compounded by fears over U.S.

West Texas Intermediate futures were little changed on Friday and poised for a 1.1% drop this week, with unprecedented levels of US production as well as pipeline bottlenecks in the Permian basin weighing on the American gauge.

Also holding the attention of traders this month has been the widening spread between Brent and WTI prices.

Global benchmark Brent fell 51 cents to $77.05 a barrel, a 0.7 percent loss.

OPEC and its partners made a decision to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry. The U.S. benchmark traded at a discount of more than $11 to Brent crude for the first time since March 2015. "Financially it makes sense for buyers to take WTI as it is so cheap". Surging output and a lack of pipeline capacity in the prolific Permian Basin shale play in Texas is exacerbating swelling United States of America inventories.

"A drop in inventories in the U.S. was overshadowed by USA output which jumped to a record high level", ANZ analysts said.

While hedge funds invested in US oil are betting pipeline bottlenecks will make Texas crude even cheaper, trading giants are seeing an opportunity to export millions of barrels as shale output continues to surge.

"Investors will hold tight till June 22 as OPEC members meet in Vienna (to consider).supply cut policies for 2018 and beyond", said Benjamin Lu, a commodities analyst at Singapore-based broker Phillip Futures.

According to the latest available figures by OPEC's secondary sources-the ones that OPEC uses to measure quotas and compliance with the deal, OPEC's production in April increased by 12,000 bpd over March, to average 31.93 million bpd, as Saudi Arabia boosted its production by 46,500 bpd. Hedge funds and other money managers cut their bullish wagers on US crude futures and options in the week to May 29, as prices dropped by about 7 per cent, according to data released by the Commodity Futures Trading Commission on Friday. Crude grades on the U.S. Gulf Coast are surging, with prices in East Houston the strongest versus WTI since at least 2016 and Light Louisiana Sweet the strongest in three years.

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