Oil prices fall on higher U.S. crude inventories
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[October 12, 2017]
By Christopher Johnson
LONDON (Reuters) - Oil prices slipped on
Thursday as U.S. fuel inventories rose despite efforts by OPEC to cut
Brent crude oil was down 60 cents at $56.34 a barrel by 1055 GMT. U.S.
light crude was 75 cents lower at $50.55. Both benchmarks have risen
more than 20 percent from their lows in June as world oil markets
The Organization of the Petroleum Exporting Countries and other
producers including Russia agreed last year to reduce output by 1.8
million barrels per day (bpd) to prop up prices and the cuts, from
January, have helped drain inventories.
The OPEC-led deal helped lift oil from the $30 to $40 per barrel range
in late 2016/early 2017. But traders say supplies remain ample despite
these cuts, thanks in large part to surging U.S. production <C-OUT-T-EIA>.
Higher U.S. production is allowing U.S. companies to export increasing
volumes to world markets, feeding inventories and helping to undermine
OPEC's efforts to tighten the market.
U.S. crude stocks rose by 3.1 million to 468.5 million barrels last
week, according to the American Petroleum Institute.
Official U.S. fuel inventory data is due to be published on Thursday by
the Energy Information Administration.
OPEC is widely expected to extend its cuts beyond the current expiry
date of end-March 2018.
"There is little doubt that leading producers have re-committed to do
whatever it takes to underpin the market," the International Energy
Agency said in a report on Thursday.
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A pump jack is seen at sunrise near Bakersfield, California October
14, 2014. REUTERS/Lucy Nicholson/File Photo
"For next year, the crude and product markets look broadly balanced, assuming
OPEC holds output steady at around current levels," the IEA added.
Many analysts expect Brent to stay between $50 and $60 a barrel as long as
global markets stay balanced.
"Our updated global supply-demand balance ... shows peak stock draws in 3Q17,"
Goldman Sachs said in a note to clients.
The U.S. bank said oil supply and demand fundamentals meant it expected Brent to
average $58 a barrel in 2018.
But risks remain, including the possibility of tension in the Middle East.
U.S. President Donald Trump is threatening to impose sanctions on Iran less than
two years after they were lifted under a 2015 deal between Tehran and leading
world powers following Iran's agreement to suspend its nuclear program.
In Venezuela, an OPEC member with huge oil reserves, an economic and political
crisis is also threatening production.
(Addititional reporting by Henning Gloystein in Singapore; editing by Dale
Hudson and Jason Neely)
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