Oil prices sank more than 3 per cent to their lowest in more than five weeks on Wednesday following USA data showing an unexpectedly large weekly build in US gasoline inventories and International Energy Agency (IEA) data projecting a big increase in non-OPEC output in 2018.
Meanwhile, the IEA issued a warning that the global oil glut looks set to last through 2017 despite Opec's move, in concert with 10 non-Opec producers, to take 1.8m barrels per day (bpd) of production out of the market.
The U.S. Energy Information Administration reported that domestic crude supplies fell (http://www.marketwatch.com/story/oil-prices-extend-losses-as-eia-reports-smaller-than-expected-fall-in-us-crude-supplies-2017-06-14) by 1.7 million barrels for the week ended June 9.
Sign up now and get breaking news alerts delivered to your inbox. He said at OPEC's meeting in late May that there would be a "marked" decrease in the kingdom's shipments to the U.S.
The last time this happened, in mid-2014, it was a precursor to a massive selloff in oil that dropped Brent from US$108 a barrel to about US$47 a barrel in the span of five months.
While this would not affect global inventories, restricting the amount of oil coming into the USA should theoretically bring down inventories in the much-watched market, if it weren't for Iraq's increased oil exports to the US.
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OPEC members made a decision to cut production by 1.2 million barrels per day. This comes on top of OPEC's most recent production report revealing a almost 340,000 barrels per day increase in May output versus April.
What will influence crude prices the most Wednesday?
OPEC's own compliance with the cuts has been questioned, and the producer group said in a report this week that its output rose by 336,000 barrels per day in May to 32.14 million barrels per day.
Crude stocks at the Cushing, Okla., delivery hub fell by 1.2 million bbl, EIA said. In 2016, the top three crude oil producing countries were Saudi Arabia (10.46 mb/d), Russian Federation (10.29 mb/d) and the United States (8.88 mb/d).
"Oil has been weighed down by the market's impatience with the generally slow pace of the global inventory drawdown amid a significant recovery in global oil supplies, particularly from the US", OPEC said in its June report today.
"Crude oil is still struggling to rebound", said Olivier Jakob, strategist at Petromatrix, adding that OPEC's gradual approach to rebalancing was giving US producers time to drill new wells that were undermining the impact of the group's cuts.
China imported 12.5 percent more oil in the first four months of this year, but imports from Saudi Arabia rose by a paltry 2.5 percent.