Futures were unchanged in NY after falling 1.2 percent Monday. US drillers targeting crude added rigs for a 22nd straight week, the longest uninterrupted stretch of growth in three decades, according to data from Baker Hughes Inc. on Friday. Libya recently announced that it would unblock 160,000 barrels a day of production, which has been halted for almost two years due to a dispute with a German energy company.
Oil prices dipped on Monday, weighed down by a continuing expansion in US drilling that has helped to maintain high global supplies despite an OPEC-led initiative to cut production to tighten the market.
By Friday, most of the markets have been convinced that OPEC's efforts to stabilize oil prices and end a three-year oversupply has fallen into a negative side as rising crude supplies proved to be more aggressive than expected.
OPEC crude oil output rose 290,000 b/d in May to 32.08 million b/d-the highest level so far this year-after comebacks in Libya and Nigeria, which are exempt from supply cuts.
"Current expectations indicate the market to rebalance in the fourth quarter of this year taking into account an increase in shale oil production", the minister noted.
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"Implied crude production seems to have moved upwards at a rather rapid pace, United States gasoline demand has taken a turn to the downside just as the summer driving season starts and total United States oil stocks have not drawn for two weeks".
Brent crude futures LCOc1 were down 11 cents, or 0.23 percent, at $47.26 per barrel at 0035 GMT. Last week, the July West Texas Intermediate crude on the New York Mercantile Exchange sank by 3.7% or around $1.73 before closing at $44.73 per barrel which was the lowest market close since November 14 based on data from the Dow Jones Industrial Average.
If OPEC wanted to push stockpiles back down to their five-year average, its official target, then the cartel would need to carry out much deeper cuts in its levels of production, the broker said in a research report published on Monday but dated 16 June.
He added, "The world needs about 96.5 million barrels per day [bpd], we're producing about 97.5 million bpd, so you do the math; we though the 1.8 million bpd production cut would have helped, and it certainly would have, except for shale ending up shooting OPEC in one foot and OPEC shooting itself in the other". The North American benchmark WTI is now trading at $44.6 per barrel and Brent at $2.6 per barrel premium to WTI. The global benchmark crude traded at a premium of US$2.48 to August WTI. While U.S. imports of primarily crude oil from Venezuela have been on the decline, U.S. exports of petroleum products to Venezuela have increased largely because of Venezuelas tight finances that leave it unable to invest and maintain its own domestic refineries.
"Although there are signs of improved global growth, the underlying demand is still less than supply", he said.
Compliance in April and May was above 100 percent, he said.