US Crude Oil Inventories: Largest Fall since September 2016

Phillip Butler
July 14, 2017

In its monthly report, OPEC said its members' combined average daily output rose by 340,000 barrels a day, mainly from Libya and Nigeria. The rally hasn't put oil anywhere near the $60-mark that many had predicted it would be on its way to by now, but it does show that investors may believe the 11-month lows the market hit at $42.53 in June are about the bottom, said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. India's International Olympic Committee bought its first sour crude oil cargo from the US last week.

Saudi Arabia in turn plans to export less: it is planned to cut shipments in August by more than 600,000 bpd, taking exports for that month to their lowest level this year, to balance a seasonal rise in domestic use.

The "hefty" declines in oil stockpiles projected for the second half of this year may be tempered if Libya is able to sustain its output recovery and Nigeria makes further advances, the agency said.

"For fellow OPEC members, who agreed to reduce production by 1.2 million bbl/d, to see their cut effectively diluted by almost two-thirds must be very frustrating, especially as their pact has, hitherto, been well observed by historical standards", the IEA said. The build in total USA petroleum inventories for the week ending June 2 was the largest for any week since 2008.

"Financial data suggests that while output might be gushing, profits are not and recent press reports quoted leading company executives saying that oil prices need to be around $50/bbl to maintain production growth", the IEA said.

By the IEA's estimate, it's not just three members undermining OPEC's efforts. Prices fell after EIA reported builds in total US crude oil and petroleum products inventories that were above the five-year average during the weeks ending June 2 and June 9.


The volume is below the OPEC benchmark production level of 1.8 million barrels set for Nigeria. However, the initiative ultimately failed when Iraq, OPEC's No. 2 oil producer, began selling its heavy crude to American buyers as a substitute for Saudi Arabian grades.

Producers are now set to meet in Saint Petersburg in Russian Federation on July 24 to review the output situation.

Crude inventories fell 7.6 million barrels in the week to July 7, to 495.35 million barrels. Since the shale revolution through 2000s, US producers reached a production level that took the country from a net importer to a net exporter.

In fact, PIRA Energy estimates predict that in three years the United States will export 2.25m barrels a day, against the 2.1m b/d of Kuwait, 1.7m b/d of Nigeria, and 1m b/d of the USA at the beginning of the year.

As early as 2016, Mercuria, one of the biggest energy traders, acquired a crude supply and marketing business that was the key to more than 150 new shale producers all across the US, Bloomberg sources reported. We will continue to be very active.

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