Commodities - Oil Prices Drops on Surging US Crude

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USA crude stockpiles last week rose to their highest since November 2017 last week as imports increased, while gasoline inventories posted the steepest drawdown since September 2017, the Energy Information Administration said.

"We expect oil price to eventually move higher in Q2 as OPEC+ potentially runs the risk of over-tightening the market by maintaining its current course of action", Harry Tchilinguirian, strategist at BNP Paribas, told the Reuters Global Oil forum.

However, the total motor gasoline inventories decreased by 7.7 million barrels last week, showed the EIA report.

U.S. West Texas Intermediate crude oil futures rose 40 cents to $64.38 U.S. per barrel.

"OPEC's ongoing supply cuts and U.S. sanctions on Iran and Venezuela have been the major driver of prices throughout this year, " said Hussein Sayed, Chief Market Strategist at futures brokerage FXTM.

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On the other hand, the USA crude oil output stays at a record 12.2 million barrels per day (bpd).

The increase report defied market expectation, which forecast a build of 2.29 million barrels of crude oil inventories in the country.

Prices have been further lifted this week by escalating violence in Libya, a significant supplier of oil to Europe, which produced around 1.1 million barrels per day (bpd) of crude in March.

Support is strong because supply is tightening. In January, stockpiles of crude oil and gasoline were well above their five-year averages. They meet on June 25-26 to decide whether to extend the pact.

Prices plunged on Thursday as traders continued to react to rising USA inventories. Besides, the global economic slowdown and the recent drop in world GDP forecast by International Monetary Fund have cast doubt over growth in demand for fuel.

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Venezuela's oil output sank to a new long-term low last month due to U.S. sanctions and blackouts, with production plunging to 960,000 bpd in March, a drop of nearly 500,000 bpd from February.

Global oil demand is estimated to average 99.91 million b/d this year, compared with 98.70 million b/d in 2018, OPEC said.

"The global oil market is clearly moving back towards balance thanks to Opec+ production cuts".

Iraq's production fell marginally to 4.52 million bpd in March, slightly above its quota of 4.51 million bpd, according to OPEC secondary sources.

The agency, which coordinates the energy policies of developed nations, saw oil stocks in industrialized countries fall in February by 21.7 million barrels, putting inventories 16 million barrels above their five-year average.

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