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Oil Hits Three-Week Low on Record-High Inventories

03 March 2017

Saudi Arabia continued to lead OPEC's efforts to cut production, helping the organization get closer to a goal set out in a historic accord previous year. Saudi Arabia, the de-facto OPEC leader and the biggest producer of the bloc not only reached its target production cuts, according to the oil ministry of the kingdom it has cut more than required. Interestingly, this price level, according to unnamed OPEC sources, is considered sufficient to discourage US shale producers from building production further.

In February, OPEC averaged a supply of 29.87 barrels per day, against 29.96 million bpd in January and 31.17 million bpd in December, according to the survey. "That's probably due to US inventories that are at three-decade highs, USA production rising above 9 million barrels a day again and the huge global supply overhang", reports Bloomberg Quint. The non-OPEC members who had supported the cuts have achieved 60 percent compliance at the moment. US crude imports fell 14 percent to an average 7.29 million barrels a day for the week ended February 17.

Kuwait pledged to cut production by 131,000 bpd from a baseline of 2.838 million bpd.

Virendra Chauhan, an oil analyst at Energy Aspects in Singapore said that "The market is largely a range-bound market, although positioning is quite skewed at present which could mean that when things do pop, it could be a violent swing", Chauhan also pointed that the current weakness US Brent crude experience is an offset from the current historical US inventory statistics yesterday.

OPEC has made a decision to produce 1.8 million barrels less per day to end the global oil oversupply.

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The Labor Department released a report on Thursday showing that first-time claims for USA unemployment benefits fell to their lowest level in over forty years in the week ended February 25th.

The EIA estimates that U.S. crude oil production will average 8,980,000 bpd and 9,530,000 bpd in 2017 and 2018, respectively.

The market offered little reaction to news of a rise in North Sea crude supply next month.

USA crude exports have averaged nearly 900,000 bpd during the last four weeks, up from about 500,000 bpd in September. Traders were looking for a decline of 1.789 million barrels.

Crude oil fell for a third consecutive session on Thursday as a record build-up in United States stockpiles weighed on the market, with producers boosting shale oil production.

Oil Hits Three-Week Low on Record-High Inventories