Oil prices fall on OPEC output increase, rising US crude stocks (BP.)

The state refiner buys about 4 million tons of Iraqi grades annually on a term basis which matches the volume it gets from Saudis

The state refiner buys about 4 million tons of Iraqi grades annually on a term basis which matches the volume it gets from Saudis

After basing the legitimacy of its initial crude cutback initiative, and more recently its extension, on the argument that it was resulting in an imminent market rebalance, the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday admitted that the recovery is now underway at a "slower pace" - and that the cartel's output in May increased due to Nigeria and Libya being exempt from the deal.

Saudi Arabia, the world´s top oil exporter, is leading an effort by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by nearly 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 in order to prop up prices.

Benchmark Brent crude LCOc1 was 17 cents lower at $48.12 per barrel by 1236 GMT, reversing gains made earlier in the session when it edged up to $48.67.

Adding to the supply surplus is rising USA production from shale drillers that has pushed US output up by 10 percent over the a year ago to 9.3 million bpd, not far below levels by top exporter Saudi Arabia.

Oil prices have slipped 14 percent in NY this year as hopes that supply curbs by OPEC and partners such as Russian Federation would end a three-year surplus have given way to concern that the cuts aren't deep enough and that USA shale drillers will fill any shortfall.

This was "due to changes in fundamentals, especially the shift in United States supply from a forecast contraction to positive growth", the report said.

US crude inventories remain stubbornly high.

Last month Opec extended a six-month agreement to curb production by a further nine months to attempt to bring inventories down to nearer average levels and support oil prices.

"By some accounts this increase is a troubling threat to Opec compliance, but we note that it was driven by 352,000 bpd of additional supply from Libya and Nigeria", wrote Tim Evans, energy analyst at Citigroup.

Brent has dropped back below $50 since the OPEC meeting.

US drilling activity has continued apace, driving up USA output by more than 10 percent since mid-2016 to above 9.3 million bpd.

Traders said market intelligence firm Genscape had forecast a draw down of more than 1.8 million barrels at the Cushing, Oklahoma delivery point for USA crude futures. The figures added to market pressure after a report from the American Petroleum Institute that estimated domestic crude stocks rose by a more-than-expected 2.8 million barrels in the week ending June 9.

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