Oil Prices Rebound As EIA Reports Big Crude Draw

Reaction to the U.S. employment data could be significant for oil prices if the data is substantially away from consensus expectations of an increase around 180,000, although position adjustment into the weekend is likely to be a more important market factor.

Rystad Energy has predicted that U.S. oil production could hit an all-time high of 10 million barrels per day before the end of 2017.

However, U.S. crude production rose to 9.34 million bpd last week, up almost 500,000 bpd from a year ago.

There's been modest crude output growth in the Gulf of Mexico, but that production mostly offsets declines seen in conventional oil fields, according to Rystad.

"Sentiment is very poor and yesterday's survey from Reuters regarding OPEC production in May added to the scepticism about OPEC's capability to rebalance the market as quickly as hoped for", Commerzbank commodities analyst Carsten Fritsch told the Reuters Global Oil Forum. The American Automobile Association (AAA) is predicting a heavier than normal USA driving season; expecting that cheap gasoline and a stronger American economy will have more motorists hitting the highways.

Meanwhile, the U.S. Department of Energy reported that crude stockpiles were down to 6.4 million barrels in the week to May 26, beating analyst expectations for a decrease of 2.5 million barrels.

The declines were good news for oil markets, where prices have trended lower recently over concerns that rising US production is offsetting output cuts by OPEC and other major producers and keeping global markets awash in oil. Overall, U.S. carbon emissions have been declining for several years, last year falling to levels not seen since 1992, in part as increased natural gas usage has displaced dirtier coal.

Losses would be the fifth in seven sessions for US oil, which has now canceled out more than half of a rally that had briefly taken prices back to $50 a barrel in May. Weinberg believes the market may be disappointed, and that crude prices will fall back to $50.

United States production, meanwhile, is rising close to levels from top producers Russian Federation and Saudi.

Crude exports also hit a peak, rising almost 700,000 bbl/d to 1.3 million bpd, as imports fell 987,000 bbl/d, the EIA said. Domestic production dipped to a low of 8.6 million barrels in July 2016, down 10% from the peak.

Igor Sechin, chief of Russia's largest oil producer, Rosneft, said US producers could add up to 1.5 million bpd to world oil output next year. The deal was that OPEC members would cut oil production by 4.5% to about 32.5 million barrels per day. Libya's daily output recently touched 800,000 barrels a day, up from 600,000 barrels late a year ago.

In March, according to the monthly data, daily oil production in Texas barely registered an increase, edging up 0.1 percent to 3.3 million barrels.

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