Oil prices dip on fears Middle East rift could harm OPEC cuts

An office worker walks past a logo of the Singapore Stock Exchange outside its premises in Singapore

An office worker walks past a logo of the Singapore Stock Exchange outside its premises in Singapore

Sentiment deteriorated further last week after data from oil-field services company Baker Hughes Inc. on Friday showed US oil drillers adding 11 more active rigs in the week ended June 2. The market expectation for crude stocks was a decline of 3.5 million barrels.

American crude production will average more than 10 million barrels a day in 2018, breaking a record nearly five decades old, according to the Energy Information Administration's monthly Short-Term Energy Outlook report Tuesday.

Nevertheless, prices drifted lower to the $47.60 p/b area ahead of the official inventories data with a slightly firmer dollar having some negative impact on prices.

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning.

OPEC and other producers including Russian Federation have pledged to cut about 1.8 million barrels per day (bpd) to help reduce global inventories.

Market participants will be watching to see if Qatar, a member of OPEC, decides to disrupt the production cutback deal.

Overnight, crude futures settled sharply lower, after data on Wednesday showed that supplies of USA crude rose for the first time in nine weeks, adding to concerns that rising United States oil output would undermine Opec and its allies' efforts to curb supply. Royal Dutch Shell (RDSA) dipped 0.2%.

Gasoline inventories also unexpectedly surged, imports increased, and exports dropped, the EIA data said.

West Texas Intermediate for July delivery slid 14 cents to $48.05 a barrel on the New York Mercantile Exchange as of 7:52 a.m.in London.

The United States has begun importing Iraqi oil at a rate of 1.1 million barrels per day to replace export cuts announced by Saudi Arabia late last month, new figures compiled by Bloomberg show.

Investors fear that should geopolitical tensions in the Middle East escalate, Qatar may abandon its production quota previously agreed under the OPEC deal, which could derail the global pact to extend production curbs until March.

Surplus oil in many parts of the world and developments with Qatar had traders nervous, even after Kuwait Oil Minister Essam al-Marzouq said Qatar remained committed to restricting crude output under an agreement between OPEC and several non-OPEC suppliers. The previous record average was 9.6 million barrels a day in 1970. The global Brent crude benchmark climbed as high as $50.74 on Monday in Asia before closing lower at $49.

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