OPEC, US shale producers to continue dialogue

Alicia Cross
July 13, 2017

Giving its first forecasts for 2018 in a monthly report, the Organization of the Petroleum Exporting Countries said the world will need 32.20 million barrels per day (bpd) of crude from its members next year, a fall of 60,000 bpd from this year.

Those output cuts, in place since the start of the year, have lent prices some support, but in recent weeks rising output from Libya and Nigeria - OPEC members exempt from the output reduction deal - has pushed supply higher.

The report from OPEC's Vienna-based research department indicates that the accord didn't go far enough, which could go some way to explain the lack of a sustainable price rally following the cuts.

The U.S. crude stocks drop will raise hopes that a long-awaited market rebalancing is under way.

Gasoline demand tends to increase in the northern hemisphere summer as US drivers take to the road.

US heating oil futures were also up nearly 2 percent at midday.

"In order to meet its Opec quota and meet its domestic demand during summer, Saudi Arabia has made big cuts in allocations internationally by more than 600,000bpd for the month of August", the source said.

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Benchmark Brent futures were up 35 cents at $47.87 a barrel by 2.44pm GMT, while US West Texas Intermediate crude was up 57c, or 1.3%, at $45.61 per barrel.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories fell by 8.13 million barrels in the week ending July 7. This fate looks shaky as US shale producers are already pulling back and reports of investment capital for shale is drying up.

"At the end of the day we are all agreed that we belong to the same oil market". United States crude inventories fell by 8.1 million barrels, industry group the American Petroleum Institute said on Tuesday, much more than the forecast.

Lower than earlier forecast crude oil prices are expected to translate into continued low prices at the pumps for both diesel and gasoline, according to a new U.S. Energy Department report. Led by Libya and Nigeria, which are not in the list of oil output cut deal.

Last month, the EIA forecast USA drillers would produce 10 million barrels a day in 2018. If achieved, forecast 2018 production would be the highest on record, surpassing the previous record of 9.6 million barrels per day set in 1970, according to the department.

USA gasoline imports rose by 168,000 bpd to 739,000 bpd on June 23-30, 2017.

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