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US Crude Slips Under $46 amid EIA Report

May 9, 2017 at 16:48 by Andrew Moran

Oil prices are once again slipping as investors remain worried about weak fuel demand and the effectiveness of Organization of the Petroleum Exporting Countries (OPEC)’s output cut. A new report also raises US shale production outlook and slashes near-term projections of oil prices.

June West Texas Intermediate (WTI) crude futures tumbled $0.51, or 1.10%, to $45.92 per barrel at 16:33 GMT on Tuesday on the New York Mercantile Exchange. US crude is continuing to trade at levels unseen in more than five months.

Brent, the international benchmark for oil prices, is also trading in negative territory. July Brent crude futures slid $0.52, or 1.05%, to $48.82 a barrel on London’s ICE Futures exchange. Brent crude is trading at five-month lows.

Year-to-date, oil prices have significantly decreased as US crude has fallen about 20% and Brent crude has dipped 17%.

The US Energy Information Administration (EIA) released its monthly Short-term Energy Outlook report on Tuesday. According to the EIA, US crude production is forecast to be 9.31 million barrels per day (bpd) in 2017, up 1% from last month’s report, and 2018 output is expected to reach 9.96 million bpd, up 0.6%. The EIA also slashed its 2017 forecast for oil prices by 3%: US crude is seen at an average of $50.68 and Brent crude is seen at an average of $52.60.

With rising concerns over slower crude demand, traders are worried about OPEC’s clout to rebalance the global markets. Even with OPEC countries and Russia set to extend its six-month production freeze arrangement at this month’s meeting in Vienna, oil prices have been unable to rebound. Saudi Arabia has said that it is willing to do whatever it takes to normalize a market that has had an oversupply for two years.

Despite OPEC members reaching full compliance, markets are suggesting that not too much progress has been made five months into the agreement. Recent data show that money managers have cut their net long positions by a third in the last two months.

Investors are looking ahead to two key industry weekly reports this week from the American Petroleum Institute (API) and the EIA.

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