Oil falls Thursday as market stays well supplied despite cuts

The Organization of the Petroleum Exporting Countries, Russia and other producers originally agreed to cut production by 1.8 million barrels per day for six months from January 1 to support the market.

Prices also got a lift mid-week after data showed crude stockpiles retreated for a sixth consecutive week in the U.S. The Energy Information Administration said Wednesday inventories dropped 1.8 million barrels over a week to May 12.

"Bill Strazzullo, chief market strategist at Bell Curve Trading - who correctly called for crude's plunge to the $30 range back in 2013 - said oil could be on the verge of a massive rally that would send the commodity to levels not seen in three years", reports CNBC. "On the other, there are those who are focused on the real drawdowns that have started to occur in US oil stocks over the past month or so", he said.

"I think this market will rebalance itself very quickly".

"OPEC ministers likely will continue to talk oil higher, there is more chatter on the discussion and that means there will be more volatility in prices", said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. Nothing has been decided yet, but deeper cuts are on the table of discussions, depending on estimates of how fast and how much non-OPEC producers, most notably the USA, would raise supply, according to an OPEC source who talked to Reuters.

"If Opec cuts production even more, it will likely lose additional market share to United States shale and prices may not move up much more", the bank said.

Members of the cartel along with Russian Federation and other producers are due to meet on May 25 to prolong the pact. New (KOSDAQ: 160550.KQ - news) wells have an average break-even price between $43 and $45 a barrel in the current market, said Reed Olmstead of IHS Markit (Stuttgart: A1139A - news). Yet, production in the US has been increasing, threatening to derail the group's goal.

It added that preliminary March and last month's data based on weekly figures shew a return to an upward trend with industrial, road transportation fuels, notably distillates and motor gasoline, accounting for the bulk of these increases.

It seems that the Organization of Petroleum Exporting Countries (OPEC) may be losing control of oil prices worldwide.

Whatever the outcome of the much-anticipated meeting, oil producers will still face a dilemma.

Global oil markets are on course to reach a supply-demand balance in 2017, the IEA said, with supply deficits expected to pick up speed in the near term.

An extension to the OPEC deal will be the main point of conversation when the 13 member countries meet in Vienna on May 25.

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