Oil dips as U.S. stocks increase, defying Opec-led reduction efforts

Oil dips as U.S. stocks increase, defying Opec-led reduction efforts

This inventory decline may prove to be the inflexion point we have looked for in the data, but crude stocks remain extremely elevated and are only 2.5% below the all-time high reached at end March. The last time the market fell to this level was before the end-November OPEC meeting, where it was agreed that oil producers would cut output for the first time in eight years.

Rebalancing the global oil glut is going to take more than a temporary pullback by the world's largest producers because USA unconventional production is overwhelming any shortfall and coming back faster than anticipated, the International Energy Agency said.

Crude oil futures have been volatile as investors expect US shale gas supplies to rise while oil-producing countries continue to cut output to prop up prices.

On Monday, Saudi Arabia and Russian Federation pledged to continue cutting supplies to prop up prices and stabilize the market.

Brent crude was down 15 U.S. cents at $51.50 per barrel by 8.51am GMT.

South China Sea code of conduct draft approved
The Philippines and China are locked in a dispute in South China Sea where around US$5 billion worth of trade passes through. The waters of the South China Sea are claimed by numerous countries, including Brunei, Indonesia, Malaysia and Vietnam.

Both benchmarks rose on Wednesday after news of a drawdown in USA crude inventories and a dip in US output.

"The most closely watched data point on the supply side is USA crude production", said researchers. Since bottoming out in September, however, USA crude oil production has increased by almost 465,000 b/d.

"The effects of higher crude runs may not have fully filtered through yet, with stocks of unfinished oils having risen strongly over recent weeks, meaning that the headline categories should start to reflect some of this in the near future", he said. US output "increased again in February by almost 200,000 b/d, and at 9.03 million b/d was the highest since March previous year".

US crude production has climbed 10 percent since mid-2016 to 9.3 million barrels per day, close to levels from top producers Russian Federation and Saudi Arabia.

The market is looking forward to OPEC and non-OPEC producers' meeting on May 25 in Vienna. Off-topic, inappropriate or insulting comments will be removed.

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