Global Oil Prices Extend Gains on EIA Production Trim

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Oil prices on Wednesday extended gains from the previous day as the USA government cut its crude production outlook for next year and as fuel inventories plunged.

That's because the government agency also cut its 2018 US production forecast to 9.9 million barrels per day.

Crude inventories fell 7.6 million barrels in the week to July 7, compared with analysts' expectations for a decrease of 2.9 million barrels.

The world's biggest oil exporter told OPEC it raised output by 190,000 barrels a day to 10.07 million in June, a person familiar with the matter said, higher than 10.058 million limit set past year.

Middle East brawl entered its second month as nine countries like Saudi Arabia, United Arab Emirates, Bahrain, Egypt, and Yemen has severed diplomatic ties with Qatar citing the latter's support for extremist ideas and terrorist groups, and also of meddling in other countries' affairs.

Without further cuts by OPEC and other producers or a significant fall in oil inventories or a decline in USA drilling, Goldman said crude prices could fall below $40 per barrel.

"We (OPEC) are fairly in consensus on our position on cuts", he said, adding that OPEC hoped oil prices would stabilize later this month.

Before EIA released the storage report, Brent was up 1.9 percent and WTI was up 2.4 percent.

"A rebound in Libyan and Nigerian production added pressure to an already amply supplied Atlantic Basin due to a massive increase in U.S. shale oil production, while demand from Asia was weaker on account of upcoming refinery maintenance and unfavourable arbitrage economics", OPEC said.

The price gains come even as US oil production has continued to increase. US crude was 50 cents lower at $43.90.

Despite a large weekly drop in crude inventories, banks continue to mark down oil prices. For the Brent crude, August delivery was up by a total of $48.34 a barrel or a total of 1.8% at 81 cents.

And the punchline: OPEC expects to oversupply global markets markets by ~900k b/d in 1Q next year, with U.S. shale scapegoated as the culprit for OPEC's failure to bring the market back into equilibrium: Non-OPEC supply to grow by 1.14m b/d in 2018, up from 800k b/d in 2017.

Libya and Nigeria, two OPEC members exempt from cutting output, once again led the increases. The EIA estimates that USA gasoline consumption is expected to average 9,390,000 bpd in 2018-0.2% higher than previous estimates. US production rose 0.6% in the past week to 9.4 million barrels a day. But production elsewhere has risen as OPEC has held back.

The U.S. vaulting into the top ranks of exporters would have been unthinkable even a few years ago. Given the demand outlook, that would leave no room for Opec growth next year.

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