Oil prices tick up as Saudis cut exports to Asia, US

Oil prices up slightly in Tuesday trading

Oil prices rose slightly on Tuesday after OPEC detailed global supply cuts, but increases were limited as the cartel reported an overall increase in production in May and admitted that the rebalancing of the market was moving at a slower pace than earlier anticipated.

Brent crude was up 43 cents to $48.72/barrel by 1:53 EDT, and US light crude was up 38 cents to $46.46/barrel.

Prices were up earlier in the day after Saudi Arabia said it would cut exports to customers, including a 300,000 b/d reduction in supply to some Asian markets.

The increase in OPEC’s total output is led by recoveries in Nigerian and Libyan production.  Both countries are exempt from the cartel’s supply cut pact.

The report also showed the market was rebalancing at a “slower pace”.

“Crude oil is still struggling to rebound,” Olivier Jakob, strategist at Petromatrix told Reuters.

He added that with OPEC taking a gradual approach to rebalancing the oil market, US producers were given time to drill new wells, somewhat undermining the cartel’s efforts.

Jakob said for the cuts to have significant impact, Riyadh had to continue to curtail supply beyond the northern hemisphere’s summer months.

“They’re making a lot of headlines about reducing supplies but that’s also right in their seasonal pattern of lowering exports in July, August because of domestic needs,” he said.

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Reuters reports trade data shows OPEC shipments to customers averaged around 26 million barrels per day (b/d) in the first half of 2016 and are expected to average around 25.3 million b/d in the first six months of 2017.

The markets closed before the American Petroleum Institute said crude stocks rose by a surprising 2.8 million barrels for the week to June 9, against forecasts for a 2.7 million-barrel drawdown.

The US Energy Information Administration will release crude inventory data on Wednesday morning.

Earlier in the week, Genscape traders looking at market intelligence forecasted a draw down of over 1.8 million barrels at the Cushing, Oklahoma oil delivery hub.