Published: Fri, June 16, 2017
Economy | By Annette Adams

Oil Prices Gain as Saudi Arabia Cuts Ties with Qatar

Oil Prices Gain as Saudi Arabia Cuts Ties with Qatar

August Brent crude LCOQ7, -0.49% on London's ICE Futures exchange fell 16 cents, or 0.3%, to $$49.31 a barrel.

Brent crude prices LCOc1 were 29 cents, or 0.6 percent, higher at a $48.35 a barrel, having fallen 4 percent in the previous session, also the lowest since May 4.

Traders said an ongoing fuel supply overhang was keeping prices under pressure despite a pledge led by the Organization of the Petroleum Exporting Countries (OPEC) to hold back nearly 1.8 million barrels per day (bpd) of production until the first quarter of 2018.

U.S. crude inventories probably dropped by 3.5 million barrels last week, a ninth straight decline, according to a Bloomberg survey before the release of data from the Energy Information Administration on Wednesday.

The revision is another sign that USA drillers are taking full advantage of higher oil prices buoyed by OPEC 's deal with crude exporters to limit production in a bid to shrink a global oversupply.

Gasoline futures tumbled four per cent to US$1.4921 a gallon, lowest since May 10, as rising inventories fed worries about weak demand.

US crude production has ranged by around 9.3 million barrels a day in the past four weeks which is probably why the government will be expecting production to reach 10 million barrels a day by next year.

Traders will be closely watching USA weekly oil data due Wednesday.

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The rise in USA production has been driven by a record 20th straight weekly climb in oil drilling for new production, with the rig count climbing by 11 in the week to June 2, to 733, the most since April 2015.

Importer nations have opted to take advantage of low oil prices to stock up for the future.

The new agreement extends the production deal for nine months until March 2018.

Although Qatar is a relatively small oil producer, other OPEC states could see such an action as a reason to stop restraining their own output, traders said.

The U.S. oil and gas industry, outside of OPEC's agreement, has increased production as 24 other oil producing countries have cut back. A separate report showed that United States oil production has reached 9.34 million barrels per day for the week ending on 26th May, which is the highest level of production since August 2015.

Crude output in the United States, which is not a participant in the deal, has grown over 10 percent since past year to 9.34 million barrels per day, approaching the levels of top producers Saudi Arabia and Russian Federation.

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