Oil futures nosedive on U.S. inventory data, IEA warning

Back in November, OPEC members agreed to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to reduce the glut of oil supplies on the shore up prices.

OPEC production rose more than 336,000 bpd in May from a month earlier to 32.14 MMbpd, according to a monthly report from the group on Tuesday.

Inventories rose by 2.75 million barrels in the week to June 9 to 511.4 million, according to the American Petroleum Institute report, compared with expectations for a decrease of 2.7 million barrels.

"The numbers cast serious, serious doubt on whether there will be another hike this year", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY. "OPEC should rethink its strategy of trying to verbally and artificially drive oil prices higher, because the result of that strategy is very resilient US production". In addition, pent-up demand for hedging will pressure any moves higher in the oil market, he said.

The IEA expects global oil demand to rise by 1.4 million barrels a day in 2018-but non-OPEC supply alone is set to edge up by 1.5 million barrels.

The measures helped stabilise oil prices at the beginning of the year, with the global benchmark Brent crude sticking above US$50 per barrel.

Despite OPEC and other producers curbs to production, oil stocks are near record highs in some regions of the world, while OPEC members exempted from the oil deal continue to increase production.

Crude oil futures fell Wednesday morning, after weekly industry data showed a surprise build in usa stockpiles. Iraq also passed Saudi Arabia as the number one supplier to India, the fastest growing oil consumer.

"This suggests that production cuts by 11 Opec members, who have committed to the reductions, are increasingly coming at the expense of market share". Also countries like Libya and Nigeria produces more oil.

Meanwhile, U.S. drilling activity has continued apace RIG-OL-USA-BHI, driving up U.S. output C-OUT-T-EIA by more than 10 percent since mid-2016 to above 9.3 million bpd. Yet the group lowered expectations for non-member Russian Federation, which has been cooperating with Saudi Arabia on production, by 200,000 bpd, or about two-thirds of the original estimate.

"We have regularly counselled that patience is required on the part of those looking for the rebalancing of the oil market, and new data leads us to repeat the message", the IEA said. Resurgent US tight oil production has been regarded as the biggest threat to its efforts.

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