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Oil Rallies Again as US Crude Output Declines

June 28, 2017 at 16:45 by Andrew Moran

Oil futures are rallying for the fifth straight session on Wednesday as government data show a decline in US crude output and a bigger-than-expected drop in US gas stockpiles. Global supplies remain high, but they are receiving a breather thanks to lower US production levels.

July West Texas Intermediate (WTI) futures rose $0.40, or 0.90%, to $44.64 per barrel at 16:27 GMT on Wednesday on the New York Mercantile Exchange. US crude is on track for a five-session win streak.

Brent, the international benchmark for oil prices, is also climbing midweek. August Brent crude futures jumped $0.52, or 1.11%, to $47.17 a barrel on London’s ICE Futures exchange.

Despite their immense losses this month, US crude and Brent have been able to pare their losses to 7.5% and 5.7%, respectively, month to date. Meanwhile, year-to-date, US crude has shed more than 20%, while Brent crude has plunged about 20%.

According to the US Energy Information Administration (EIA), domestic crude stockpiles surged by 100,000 barrels last week. Analysts had forecast a decline of 3.25 million barrels. The data further highlighted that domestic crude output dipped by 100,000 barrels per day (bpd) to 9.25 million bpd for the week ending June 23. Gasoline stockpiles plummeted by 900,000 barrels and distillate stockpiles dropped by 200,000 barrels.

Experts note that higher oil prices will encourage US producers to continue their output levels. It is estimated that anything under $40 a barrel would prompt US oil firms to start trimming their production efforts.

With the Organization of the Petroleum Exporting Countries (OPEC) freezing output levels to 1.8 million bpd until March 2018, there is still an oil glut in international markets. Moreover, Nigeria and Libya, which are exempt from the OPEC agreement, have seen rising production figures in June.

The oil industry is trying to rebalance the market, but it is facing extensive pushback from the US because of the shale revolution persisting. There is no signs of it slowing down, especially after Energy Secretary Rick Perry renewed the administration’s support for accelerated US oil output.

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