Blame gasoline for oil's drop to the lowest level of the year

Reuters

Back in November, OPEC members agreed to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to reduce the glut of oil supplies on the shore up prices.

The IEA report came a day after OPEC's monthly oil report (http://www.marketwatch.com/story/opec-oil-production-rose-in-may-owed-to-unexpected-boost-from-iraq-2017-06-13), which showed that the group's output rose 1% in May from April amid gains in Iraq, Nigeria and Libya.

US crude inventories added 2.75 million barrels last week, while gasoline stockpiles increased by 1.79 million barrels last week, the API said Tuesday, according to people familiar with the data.

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At the same time, overall global demand is expected to pick up by 1.4 million bpd to 99.3 million bpd next year, the IEA predicted. The report said the market was rebalancing at a "slower pace". "OPEC should rethink its strategy of trying to verbally and artificially drive oil prices higher, because the result of that strategy is very resilient USA production". The move is meant to drain the market of excess supply. For one, higher-than-expected shale oil production in the U.S. partly offset Opec and non-Opec production cuts at the beginning of this year.

The benchmarks, Brent crude oil LCOc1 was down by 45 cents a barrel and USA crude CLc1 by 50 cents at $45.96.

"Abu Dhabi swiftly enforced a ban on oil tankers linked to Qatar calling at ports in the UAE, which could lead to a backlog of cargos and increased shipping costs", the report says.

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OPEC, and some non-OPEC producers led by Russian Federation, agreed last month to extend supply curbs for nine months through to the end of March 2018. Prices initially nudged higher after the world's top exporter Saudi Arabia outlined cuts to customers in July that included a reduction of 300,000 barrels per day (bpd) to Asia.

BP analysts said that production outside the Middle East fell by 1.3 Mb/d, with the largest declines in the United States (-400,000 b/d), China (-310,000 b/d) and Nigeria (-280,000 b/d). He said at OPEC's meeting in late May that there would be a "marked" decrease in the kingdom's shipments to the U.S.

Saudi Arabia reported to OPEC that it reduced output further by about 66,000 bpd in May to 9.88 million bpd.

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OPEC is curbing output by about 1.2 million bpd, while Russian Federation and other non-OPEC producers are cutting 600,000 bpd under an accord that was extended until March 2018. US crude futures, meanwhile, were down 3.4 percent to $44.92 a barrel, the lowest intraday level since May 5.

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