Published: Thu, March 15, 2018
Worldwide | By Sean Reid

Oil prices stable after two-day decline, but rising United States output drags

Oil prices stable after two-day decline, but rising United States output drags

"Prices in the upper half of the oil price-band will encourage increased supply as United States production grows and countries reduce compliance with their production quotas", Terry Marshall, a Moody's Senior Vice President, said.

Crude production from China's largest oil producer China National Petroleum Corp (CNPC) fell 1.6 percent in the first two months of 2018 compared with a year ago, a source with direct knowledge of the data said on Wednesday.

U.S. crude stocks rose by 5 million barrels, the biggest jump since late January, the U.S. Energy Information Administration (EIA) said.

There is a split between Saudi Arabia and Iran on the ideal oil price. Gasoline futures surged 1% as stockpiles sank the most since September.

Brent crude was last up 27 cents at $64.92 a barrel, off an earlier low of $64.43, while US West Texas Intermediate (WTI) futures were up 31 cents at $61.02 a barrel. Diesel futures rose 1.32 cents, or 0.7%, to $1.8871 a gallon.

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US oil production is expected to top 11 million bpd later this year.

Healthy demand and ongoing supply restraint by a group or producers led by the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation, however, have so far prevented further price falls.

The International Energy Agency and the EIA have both recently revised their US oil production forecasts higher.

"This U.S. shale engine is not expected to run out of steam anytime soon, " said Stephen Brennock, analyst at brokerage PVM.

The U.S. supply increase is expected to come as the Organization for Petroleum Exporting Countries, dominated by oil giant Saudi Arabia, works with Russian Federation to slash output after prices for crude plummeted to around $30 per barrel in 2016 from over $100 two years earlier. But the group said total global oil supply rose last month, in a sign that US shale production is undermining Saudi efforts to rebalance the market. "This would see shale oil production soar by 1.5 million bpd within a year - enough to cover the total increase in global oil demand", Commerzbank said in a note. The discount of April contracts to May slipped to 7 cents as growing supply weighed on the value of oil for prompt delivery.

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