Oil Prices Rebound As EIA Reports Big Crude Draw

Sentiment deteriorated further after data from industry group Baker Hughes on Friday showed USA oil drillers adding 11 more active rigs in the week ended June 2. Official government data showing weekly US crude inventories will be published on Thursday.

The March production figure is about 0.5 percent lower than the department’s earlier estimate of 9.15 million barrels a day for the same month, a sign that USA output could come in lower than the agency has forecast this year.

NEW YORK, June 2 (Reuters) – Crude fell more than 1 percent on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump’s decision to withdraw from an worldwide climate accord will spur further domestic production and contribute to a persistent global oversupply.

Global benchmark Brent crude futures was down 1.7 percent, or 80 cents, at $49.75 a barrel, as of 0725 GMT.

“If we hadn’t extended the deal, I believe we would have seen the price fall not 8 percent, which you mentioned, but probably 50 percent”, Novak said.

OPEC started the output cuts on January 1 in an attempt to ease bloated global inventories and boost oil prices.

The EIA (U.S. Energy Information Administration) will release its weekly crude oil inventory report on June 1, 2017, at 11:00 AM EST.

“We base or entire macroeconomic policy on the oil price of $40 per barrel”, Oreshkin said, commenting on the impact of extending the OPEC agreement for another 9 months.

Oil futures have given up all the gains posted in advance of last week’s agreement between OPEC and non-OPEC producers to extend a production cut for a further nine months.

A drop in output in Angola and Iraq and continued high compliance from Gulf producers Saudi Arabia and Kuwait helped lift OPEC’s adherence with the supply cut deal to 95 percent from 90 percent in April, according to Reuters surveys.

OPEC and other producers, including Russian Federation, have agreed to restrict output by 1.8 million bpd to drain stockpiles that are close to record highs in many parts of the world.

The Energy Information Administration (EIA) expects “crude oil production is forecast to average 9.3 million b/d in 2017 and nearly 10.0 million b/d in 2018”.

Brent crude tumbled below $50 on June 2, heading for a second straight week of losses, on worries that U.S. President Donald Trump’s decision to abandon a climate pact could spark more crude drilling in the U.S., worsening a global glut. The event is likely to lead to increased production from the USA and eventually skew OPEC’s price protections.

Prices fell 2.2 percent this week.

“The lack of moderation in USA production is undercutting OPEC efforts to manage the market”, said Michael McCarthy, a chief strategist at CMC Markets in Sydney.

The group, however, last week discussed cutting output by a further 1-1.5%, and could revisit the proposal should inventories remain high and continue to weigh on prices, sources said.