Crude Oil Bounced Once, Then Sank Following Inventory Report

Crude Oil Bounced Once, Then Sank Following Inventory Report”

Oil rose above $48 a barrel on Wednesday in response to a fall in US fuel inventories and a cut in the USA government's forecast for crude output next year which raised hopes that a supply glut is easing.

On top of the US data, the Organization of the Petroleum Exporting Countries said its members' combined average daily output rose 1.4% last month to 32.6 million barrels. "That means Venezuela is producing 437,000 barrels per day less than it was 2 years ago, which at Venezuela's average 2017 oil price of $43.60 (so far), means that Venezuela is losing over half a billion dollars every month; $6.9 billion a year".

Also, at 495.4 million bbl, US crude oil inventories were in the upper half of the average range for this time of year.

Libya will increase production to 1 million barrels per day by the end of July. The report said that big oil failed to take advantage of the oil boom years when they were making record profits and instead invested too heavily on high-cost and high-risk projects while raising dividends to shareholders leaving them unprepared for the oil downturn.

OPEC agreed with Russian Federation and some other major exporters to cut output about 1.8 million barrels per day until March 2018.

In the U.S., crude oil inventories last week dropped the most in 10 months.

Crude stocks at the Cushing, Okla., delivery hub for USA crude futures fell by 1.9 million bbl to 57.6 million bbl, their lowest level since November 2015, the EIA said. "We expect Opec will return to a strategy of production growth", he said, despite the group's commitment to extend their restraint deal through the first three months of next year.

The consultancy PIRA energy group has released a new forecast relating to the current boom of U.S. shale oil production.

Crude inventories fell 7.6-million barrels in the week to July 7, to 495.35-million barrels.

In May, OPEC production rose by 366,000 barrels per day, thanks to Libya and Nigeria. It has become especially important in recent months as market watchers await signs that output cuts from the world's big exporters are affecting a longstanding glut. However, with the rebound in USA manufacturing, and a significant expansion in oil refining and petrochemistry, United States oil consumption has increased as well, balancing the market somewhat.

The data show the nation's overall glut of oil and fuel is starting to shrink more, potentially alleviating some concern over global supplies and rising USA production. Saudi Arabia and Iraq burn large volumes of crude and fuel oil in the summer to meet electricity and air-conditioning demand. The financial firm also believes that the prices will continue to blossom as long as the rig count and oil production remains stable and steady.

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