OPEC Output Increases, Saudi Arabia Seeks Solution

Oil slides back towards 2-week lows as focus turns to US stockpile data

A good report on US economic potential and forecasts for dwindling production from American shale helped push oil prices higher in early Wednesday trading.

The Organization of the Petroleum Exporting Countries (OPEC) pumped 32,611 million barrels per day in June, 393,500 barrels more than in May.

OPEC members led by Saudi Arabia and non-OPEC countries led by Russian Federation took action and capped their oil production to support oil market prices. According to the latest now available OPEC report with data for May, Saudi Arabia directly communicated to OPEC that its crude oil output in May was 9.880 million bpd. The exemption was granted to allow both countries to rehabilitate oil infrastructure that had been sabotaged by militants in recent years, giving them leeway to rehabilitate their industries.

The U.S. crude stocks drop will raise hopes that a long-awaited market rebalancing is under way.

US crude briefly rallied to a session high of $46.48 a barrel after the data was released before paring gains. Saudi Arabia consented to lessen creation by 486,000 barrels per day, under the arrangement came in December, the majority of any nation taking an interest in the cut. Brent crude rose to $48.30/bbl in London, whilst USA oil rose to $45.72/bbl in the futures market.

This news comes as the American Petroleum Institute reports a massive 8.133-million-barrel drop in US crude supply.

"U.S. gasoline demand may have peaked in absolute terms a year ago", Bank of America Merrill Lynch said, adding it expected no tightness once the peak demand summer season was over. This is a brighter outcome on the US Energy Information Administration's decision to lower its outlook on Brent Crude for the next 2 years by $2 and $4 to $51 per barrels and $52 per barrels respectively.

US oil production has jumped more than 10 percent over the a year ago to 9.34 million bpd.

Following the surge, OPEC is mulling the idea of calling on Nigeria and Libya to reduce oil output, in line with the oil cut deal reached by member and non-member states at its last meeting in Vienna, Austria.

At the end of the day, prices surged after the American Petroleum Institute (API) said US crude oil inventories fell by 8.1 million barrels in the week to July 7 to 495.6 million.

The EIA expects demand for petroleum and other liquids to rise by 360,000 barrels a day, or 1.8 percent, next year.

The source also cited late May port closures as pushing some cargoes into June, which may have resulted in higher June exports.

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