Oil Prices on Thursday, June 28th 2018 took a dunk from 3.5 year highs, since the market remained physically well supplied despite disturbed supply from Canada, Libya and Venezuela.
U.S. West Texas Intermediate (WTI) crude futures were at $72.55 a barrel at 0114 GMT, down 21 cents, or 0.3 percent from their last settlement.
Brent crude futures were at $77.63 per barrel, virtually unchanged from their last close and still below recent May highs.
So far in 2018, oil prices have remained mostly high due to high demand and voluntary supply cut by OPEC and Russia. Additionally, instability in Libya and Canada’s Syncrude incident have further added to reduced supply. After OPEC’s decision last week to increase oil supply, there was still uncertainty in the market due to these very reasons.
However, although growth of output is decreasing, crude oil production in U.S is approaching 11 billion barrels per day, while Saudi Arabia and Russia are already producing almost the same amount.
Moreover, in light of OPEC’s recent decision, the supply in Russia and Saudi Arabia is expected to rise further to 11 billion bpd. This means, soon these three countries alone will be supplying enough oil for the consumption of one third of the World.
According to Konstantinos Venetis, senior economist at research firm TS Lombard, although the physical oil market is well supplied at the moment, there are concerns for future since both Russia and OPEC are producing at their maximum output.
Even though output from U.S is rising, U.S commercial crude oil inventories have fallen by nearly 10 million barrels in the week to June 22, to 416.64 million barrels, as stated by the Energy Information Administration on Wednesday. That's below the 5-year average level of around 425 million barrels.
Owning to decreased supply from Canada Syncrude by over 300,000 bpd which is expected to continue until at least July end, U.S traders expect their inventories to drop further low.
Additionally, high exports of almost 3 million bpd and domestic refinery activity utilizing around 97.5 percent of production, the highest in more than a decade, contribute towards a decreased inventory as well.