Oil prices dip on increased US, Libya production gains

Oil prices down 2.1 per cent

Oil prices fell in trading on Tuesday as increased crude production in the United States, Canada and Libya overshadowed production cuts by OPEC and non-cartel members as well as an expected decline in US crude stocks.

 

Brent futures settled down $1.06 to $50.46/barrel and trading at its lowest day since November 29, US WTI was down $1.18 to $47.66/barrel.

Oil prices rebounded slightly in aftermarket trading following the release of data from the American Petroleum Institute that showed US crude stocks were down by 4.2 million barrels last week.  Cushing, Oklahoma inventories dropped by 215,000 barrels.

Data from the Energy Information Administration will be released Wednesday morning.

“We’ve got more output from Libya and the United States and there is no certainty OPEC will keep production cuts in place at their meeting in May,” Phil Davis, managing partner at PSW Investments told Reuters.

The poor performance of oil prices kept both US and Brent futures in technically oversold territory on most days since late April.

“Until OPEC removes the fear that they might not extend their production cuts, it will be hard for oil to get a bid,” Davis added.

Members of OPEC are meeting in Vienna on May 25 to discuss extending the supply cut deal and many are expecting the cartel to agree on curbing outputs for the remainder of the year.

According to Russia’s Energy Ministry, Russian oil production dropped slightly to 11 million b/d last month, almost hitting OPEC’s output target.

A Reuters survey showed OPEC oil output dropped for the fourth straight month in April, landing at 31.97 million b/d thanks to decreased output by Nigeria and Libya.

On Monday, however,  Libya’s state-run oil company said after months of production interruptions due to protests, output had risen to over 760,000 b/d and the African country says it plans to continue to boost production.

As well, US crude output is now at its highest level since August 2015 and production at the Syncrude Canada oilsands project is back after output was cut to zero last month after a fire at the Mildred Lake upgrader in March.

Despite the increases in US, Canadian and Libyan output, BP Chief Financial Officer Brian Gilvary told Reuters that he expects oil inventories to keep falling in 2017.

“If the OPEC cuts get rolled into the second half of the year, that will underpin oil prices,” Gilvary said. “We are managing things around $50-$55 a barrel. That’s probably the range we would expect for the rest of the year.”