A weekly report by the Energy Information Administration (EIA) on 21 June said crude inventories had fallen 2.5 million barrels and gasoline stockpiles slipped 0.6 million barrels. But, it also noted that petroleum in storage was still plentiful and that gasoline was above the upper limit of the average range for this time of year. Following this report, the price of the benchmark WTI crude fell to $42.34 a barrel, down 2.69 percent, far below its price of $54.45 a barrel in February. The Brent benchmark slid to $44.85 a barrel, down 2.54 percent.
There are several reasons why prices have not responded more to the OPEC-non-OPEC production cuts: a more than doubling in the number of drilling rigs and increases in shale-drilling efficiency have boosted U.S. crude oil production to more than 9.3 million barrels a day, up about 850,000 barrels a day in September last year. Again, Nigeria and Libya, both experiencing internal political strife and exempt from OPEC quotas, have boosted production, offsetting other OPEC cuts and raising OPEC’s total output. Moreover, Iraq is said to be cheating on its quotas, and Russia, while reporting lower production, is exporting more oil than ever.
July 3, 2017