Mubasher: Oil prices eased on early Thursday, driven by high crude production and weaker refining activity in China, despite the support by high fuel consumption in the US and a drop in its crude stockpiles.
International benchmark Brent crudes traded at $76.45 per barrel (pb) earlier in the day, shedding $0.29 from their last settlement, while US Nymex futures were at $66.57 pb, down $0.7 from their last session.
China posted a decline in refinery activity to 11.93 million barrels per day (bpd) in May from 12.06 million bpd in the preceding month, although the year-on-year runs remained high by 8.2%.
This was accompanied by a slower-than-expected growth of industrial production, investment and retail sales in the world’s second largest economy.
Another hike in crude production in the US also negatively impacted the prices, hitting a weekly record high of 10.9 million bpd last week, and rising nearly 30% in the last two years, Energy Information Administration (EIA) reported on Wednesday.
However, the strong demand curbed any further fall in prices that would be caused by the US record high.
In the same vein, EIA stated that consumption of gasoline rose to a record 9.88 million bpd last week, while the country’s oil inventories fell 4.1 million to 432.4 million barrels.
Moreover, having Brent up by almost 180% from their 2016 lows amid strong demand, the Organization of Petroleum Exporting Countries (OPEC) and Russia are set to end their voluntary production cuts.
“We expect OPEC will agree to raise output and other non-OPEC countries party to the Declaration of Cooperation to follow suit,” Barclays told Reuters, noting that a potential downside would be limited by lower spare capacity and geopolitical risks.
Russia and Saudi Arabia are expected to kick off the football World Cup tournament on Thursday, providing a chance for “the two producers’ ministers […] to discuss the issue during tomorrow’s World Cup game between the two countries” before the scheduled meeting in Vienna, Australia and New Zealand Bank (ANZ) told Reuters.
By 7:23 am GMT, Brent crudes fell 0.46% to $76.39 pb, while US Nymex futures shed 0.08% to $66.59 pb
