Here's Why Oil Prices Dipped to almost $50 Today

Dr. Maan Fares cardiologist and vice department chair of Global Patient Services at Cleveland makes a point. — courtesy

Dr. Maan Fares cardiologist and vice department chair of Global Patient Services at Cleveland makes a point. — courtesy

The latest US government drilling data showed shale production in May was set to rise to 5.19 million barrels per day (bpd), with output from the Permian play, the largest USA shale region, expected to reach a record 2.36 million bpd.

Crude futures were trading more than 30 cents higher in Asia early Thursday, but the recovery, against a rout of almost $2/barrel at the previous day's close, was more likely bargain-hunting than the start of a full correction, as the weekly counter-seasonal build in United States gasoline inventories continued to weigh on market sentiment.

Oil was down 3.66% to $50.49 a barrel, while Brent Crude was down 3.55% to $52.94 a barrel.

Prices for natural gas, meanwhile, fell as the EIA reported a larger-than-expected weekly climb in USA supplies of the commodity.

OPEC leader Saudi Arabia tightened February crude oil exports to the lowest since mid-2015, official data showed on Tuesday.

The same report also mentioned that Iranian oil minister Bijan Zanganeh said that most oil producers support an extension of output cuts by OPEC and non-OPEC countries including Iran.

Gasoline stocks posted a counter-seasonal build of 1.5 million barrels, despite heavier refining activity.

Global benchmark Brent crude futures swooned as low as $54.61, the lowest since April 7, then settled down 47 cents at $54.89 a barrel.

"OPEC and Russian Federation would love to see the price higher but it requires a not yet achieved 100 percent non-OPEC compliance, combined with a slowdown in US production growth", Hansen told UPI in response to emailed questions.

US crude imports rose last week by 56,000 barrels per day.

Now the deal's participants must weigh whether another such agreement is worth it, given that any price increases would spur more USA production.

OPEC and non-OPEC producers said after talks in Kuwait last month that they were looking into extending the output cuts, as compliance with the agreement has increased.

A number of key OPEC members including top exporter Saudi Arabia support extending their supply cut into the second half of 2017 if all participating producers, including Russian Federation and other non-OPEC countries, agree, OPEC sources have told Reuters.

US crude's intraday low was also the weakest since April 7.

Oil dropped the most in six weeks after a report showed US gasoline supplies increased for the first time since February, while crude output keeps rising. Due to the long period of low energy prices, the authorities of the oil states are trying to find other sources of income.

Oil-producing nations are moving closer toward ending a global glut and re-balancing the crude market, and Opec will decide next month whether to extend its cuts in output beyond June, the group's Secretary-General Mohammad Barkindo said.

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