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Oil prices slide over worries Middle East rift will undermine output cuts

15 Juin 2017

"Investors continue to doubt the ability of OPEC to rebalance the oil market, with crude oil prices remaining under pressure amid further signs of rising USA oil production", said ANZ Bank.

US West Texas Intermediate (WTI) crude futures had dropped 32 cents, or 0.7 percent, to US$47.08 per barrel.

USA crude output has jumped more than 10 per cent since mid-2016 to 9.34 million bpd, industry figures show.

US crude futures fell 4.6 percent, or $2.23 a barrel, to $45.96 a barrel, as of 11:18 a.m. EDT (1518 GMT). A Wall Street Journal survey estimates that USA crude oil inventories would have fallen by 3.5 MMbbls between May 26, 2017, and June 2, 2017.

Commercial crude inventories in the U.S. rose 3.3 million barrels, or 0.6 percent, to 513.2 million barrels for the week ending June 2, the U.S. Energy Information Administration (EIA) said earlier.

The revision is another sign that US drillers are taking full advantage of higher oil prices buoyed by OPEC 's deal with crude exporters to limit production in a bid to shrink a global oversupply.

The forecast was slightly decreased compared to the May report, when total world petroleum and other liquids supplies were forecast to reach 98.47 million barrels per day in 2017 and 100.4 million barrels per day in 2018.

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Crude oil futures snapped back Tuesday amid speculation recent losses were overdone.

"These tight oil producers are the new swing producers, so every time OPEC tries to influence prices by cutting production you see the tight oil market step in which is why we have an upside limit".

Distillate stockpiles, which include diesel and heating oil, rose by 4.4 million barrels, versus expectations for a 281,000 barrels increase, the EIA data showed.

"But if, as we have already seen, higher refinery runs and/or crude exports are the causes of these inventory drawdowns, then the impact on OPEC's balancing act is actually negative".

Lines in the sand emerged at the start of the week when Saudi Arabia led a coalition of Persian Gulf allies in severing ties with Qatar over allegations of support for terrorist groups like the Sunni militants aligned with the group calling itself the Islamic State. The American Petroleum Institute said on Tuesday crude inventories fell by 4.6 million barrels last week.

OPEC and other producers including Russian Federation have pledged to cut output by about 1.8 million barrels per day (bpd).

Traders will be closely watching US weekly oil data due Wednesday.

Oil prices slide over worries Middle East rift will undermine output cuts