Stockpiles Fall Less Than Expected, Oil Prices Drop

USA inventories of motor gasoline rose by 2.1 million barrels for the week ended June 9, as supplies of crude oil fell by 1.7 million barrels, the Energy Information Administration reported Wednesday.

"In 2018, we expect non-OPEC production to grow by 1.5million bpd which is slightly more than the expected increase inglobal demand".

"Our first outlook for 2018 makes sobering reading for those producers looking to restrain supply", the Paris-based energy watchdog said in its latest monthly oil market report.

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 US crude futures.

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As at the end of the first quarter, commercial inventories of oil in the OECD - as opposed to strategic stocks held by governments - had actually risen versus the end of December, despite supply cuts having begun during that period.

USA stocks were little changed on Wednesday after the Federal Reserve made a widely expected move to raise interest rates for the second time in three months.

At 4:45pm BST, the Brent contract for August delivery was down 3.78% or $1.84 to $46.88 per barrel, while the West Texas Intermediate contract for July delivery was down 3.85% or $1.79 to $44.67 per barrel.

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Energy sector shares tracked the slide in crude prices and weighed on the S&P 500, which had been trading higher earlier in the session. This comes on top of OPEC's most recent production report revealing a almost 340,000 barrels per day increase in May output versus April.

Trade data show Opec shipments to customers averaged around 26 million bpd in the last six months of 2016 and are set to average around 25.3 million bpd in the first half of this year.

The forecast for U.S. total oil production for 2017 has been revised 90,000 bpd higher, to average 13.1 million bpd, following further rig additions and increased spending.

And they have racked up production as prices rise.

"This is very unusual for this time of the year, when gasoline demand is supposed to pick up", said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany. In 2016, the top three crude oil producing countries were Saudi Arabia (10.46 mb/d), Russian Federation (10.29 mb/d) and the United States (8.88 mb/d).

"Not only are [U.S.] producers increasing spending more sharply than initially thought, the pace and duration of new rig additions and drilling activity has exceeded all expectations", it added.

The U.S., Brazil, Canada and other producers outside the Organization of Petroleum Exporting Countries will increase output next year by the most in four years, the IEA said.

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