Oil at 3-week low, pressured by growth in U.S. shale output

Ann Santiago
August 16, 2017

In China, state-owned China National Petroleum Corporation (CNPC) said gasoline demand would likely peak around 2025 and outright oil consumption would top out around 2030.

- Market participants keenly awaited the latest weekly data from the Energy Information Administration on USA stocks and production, due later on Wednesday.

Investors were also cautious after data published by oil services firm Baker Hughes on Friday showed explorers increased US oil drilling capacity for the second time in three weeks, extending a 15-month recovery.

On Monday, oil prices dropped by 2.5 percent to their lowest close in three weeks, with WTI Crude settling at US$47.59, the lowest level since July 24.

USA crude inventories probably shrank by 3.6 million barrels last week, according to the Bloomberg survey.

The draw compares to analyst expectations of a draw of 3.6 million barrels for the week ending August 11.

West Texas Intermediate for September delivery declined 38 cents to $47.21/bbl at 10:06 a.m. on the New York Mercantile Exchange.

"The market took this as a mildly bullish report", said William O'Loughlin of Australia's Rivkin Securities. Stockpiles have declined by more than 33 million barrels since the end of June, EIA data show. "This is also bearish because the more DUC wells there are, the more capacity is ready to come online in the face of any sort of price rally", said Richey. U.S. shale oil production for September which includes a new regional data input, is forecast to rise by 117,000 barrels per day to 6.15 million bpd, the U.S. Energy Information Administration said. Worse still, this momentum is not expected to change into the first quarter of 2018 when the current OPEC deal where oil output will be cut by 1.8m bpd will have run out.

On Wednesday, the EIA reported 6.5 million barrels of fall in USA crude oil inventory for the week ending August 4. Total daily production for OPEC in July was 32.869 million bpd-up from 32.696 million bpd. The compliance outside the OPEC is even worse at just 67 percent.

The Organization of the Petroleum Exporting Countries together with non-OPEC producers like Russian Federation has pledged to restrict output by 1.8 bpd between January this year and March 2018.

Oil prices are moving in a narrow band because OPEC's balancing act is offset in part by gains from the United States.

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