Oil pares gains despite U.S. drawdowns as stocks still high

Thursday, 13 Jul, 2017

Later in the session, the U.S. Energy Information Administration cut its outlook for oil prices and trimmed its forecast for how much oil U.S. drillers will pump next year.

According to its monthly oil market report out Wednesday, OPEC sees 2018 demand for its oil at 32.2 million barrels per day, down by 60,000 BPD from this year.

Meanwhile, as a first step to controlling what OPEC can control, namely supply, OPEC chief Barkindo said Libya and Nigeria are expected to send representatives to OPEC, non-OPEC Joint Technical Committee meeting in Russian Federation on July 22, where according to some, they will be asked to also enforce production caps on their output, joining the rest of OPEC in limiting supply.

The market will be closely watching OPEC's data on Wednesday, but it typically gives production numbers, not exports.

The additional supply from the U.S.to an already over-saturated oil market has often been blamed for plummeting prices.

USA oil production is booming.

USA crude briefly rallied to a session high of $46.48 a barrel after the data was released before paring gains.

A Saudi industry source said that Riyadh planned to reduce shipments in August by more than 600,000 bpd, taking exports for that month to their lowest this year. This fate looks shaky as USA shale producers are already pulling back and reports of investment capital for shale is drying up.

Opec crude output rose to 32.6m bpd in June
Opec crude output rose to 32.6m bpd in June

"U.S. gasoline demand may have peaked in absolute terms past year", Bank of America Merrill Lynch said, adding it expected no tightness once the peak demand summer season was over.

Despite the slight downward revision, US production is still set to break the 9.61 million bpd record from June 2015. U.S. West Texas Intermediate crude CLc1 rose $1.31, or 2.9 percent, to settle at $45.71 per barrel.

US gasoline stocks fell 1.6 million barrels, compared with analysts' expectations for a 1.1 million-barrel gain, but were also in the upper half of the average range, EIA said.

After the close and the supportive API data, Benchmark Brent LCOc1 futures rose $1.25, or 2.7 percent, to $48.12 a barrel.

Libya and Nigeria are both exempt from the output-restraint deal that has been observed by other Opec members and producers outside the group since January.

Changes in gasoline demand impact gasoline and crude oil (IXC) (IYE) (ERX) prices. Crude oil exports totaled 768,000 barrels a day last week, and daily average exports are up more than 76% year over year to 760,000 barrels a day.

U.S. production rose to 9.338 mbpd in the week ended June 30, 2017, up from a week ago level of 9.25, near its 22-month high of 9.35 mbd.

The source also cited late May port closures as pushing some cargoes into June, which may have resulted in higher June exports.