Oil tumbled to its lowest in four weeks as an unexpected increase in USA crude and gasoline stockpiles stoked fears that the global supply glut will remain unabated.
American crude production will average more than 10 million barrels a day in 2018, breaking a record nearly five decades old, according to the Energy Information Administration's monthly Short-Term Energy Outlook report Tuesday.
According to the Energy Information Administration (EIA), crude inventories surprised traders with a 3.3 million barrel rise in the week-ended June 2.
"The market just has to be patient", said Bjarne Schieldrop, chief commodities analyst at SEB Markets, adding that a gradual reduction in inventories would support prices without the kind of price spike that would drive USA shale production higher.
Gasoline inventories also unexpectedly rose, imports increased, and exports dropped, the EIA data showed.
The lower forecast takes into account OPEC's May 25 announcement regarding the extension of its production cuts.
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With production in these countries expected to continue to grow this summer as they recover from militancy-related outages, OPEC faces a tricky period in its attempt to accelerate the market's rebalancing.
Brent for August settlement was 56 cents lower at $49.56 a barrel on the London-based ICE Futures Europe exchange.
Commercial crude inventories increased by 3.3 million barrels after declining by about 10 million in the previous two weeks, the Energy Department reported Wednesday. Following the release, WTI futures dropped more than 4% to trade at $46.12 per barrel. U.S. crude oil (UCO) (FXN) (SCO) prices fell in post-settlement trade on June 6, 2017, despite the fall in inventories. Crude oil prices have been depressed for much of the last three years because the supply of oil in the market is simply more than the demand.
Despite this, there are doubts that an effort led by the Organization of the Petroleum Exporting Countries (OPEC) to curb production by nearly 1.8 million bpd was seriously denting actual exports. 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.
But analysts saw a risk that rivalries between OPEC members could weaken the production cut agreement.