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June 22, 2021
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Oil prices stable after two-day decline, but rising U.S. output drags

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FILE PHOTO – A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson/File Photo

By Henning Gloystein

SINGAPORE (Reuters) – Oil prices stabilized on Wednesday after posting two days of falls at the start of the week.

Support came from a report that U.S. crude inventories are not rising as much as expected during the spring season that is starting, implying healthy demand.

U.S. West Texas Intermediate (WTI) crude futures were at $60.81 a barrel at 0145 GMT, up 10 cents, or 0.16 percent, from their previous close.

Brent crude futures were at $64.65 per barrel, up just 1 cent.

U.S. crude inventories rose by 1.2 million barrels in the week to March 9, to 428 million barrels, the American Petroleum Institute said on Tuesday. That compared with analysts’ expectations for an increase of 2 million barrels.

Despite this, market conditions remain weak, and prices have not returned to their January highs of over $70 per barrel for Brent and almost $67 for WTI.

“The ever-expanding U.S. supply continues to pose significant downside risk to oil prices,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore.

In Libya, the Zawiya oil terminal returned to normal operations late on Tuesday after workers who were blocking ships from docking ended a strike, two sources said.

Zawiya exports crude from Libya’s giant El Sharara oilfield, which produces 300,000 barrels per day (bpd), more than a quarter of the country’s output.

Weighing on global markets has been a relentless rise in U.S. crude oil production, which has soared by almost a quarter since mid-2016 to 10.37 million bpd, overtaking output by top exporter Saudi Arabia.

U.S. crude production, pushed up largely by shale oil drilling, is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency (IEA).

Official weekly U.S. crude production and inventory figures will be published by the Energy Information Administration (EIA) later on Wednesday.

The increases in U.S. production has this year exceeded the supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), which have been in place since 2017 in an effort by the cartel, and supported by non-OPEC member Russia, to prop up prices.

Due largely to the rise in U.S. output, estimates by the EIA show global supplies will exceed 100 million bpd for the first time in the second quarter of 2018, while demand will only break through that level in the third quarter, implying a slightly oversupplied market.

That would be a reversal from a supply deficit in 2017 and early 2018.

(Reporting by Henning Gloystein; Editing by Joseph Radford)

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