US Oil Prices Tumble Below $45 After Surprise Build in Gasoline Inventories

Brent crude oil fell 30 USA cents to $46.70 a barrel, its weakest since May 5 and just above six-month lows, before recovering a little ground to trade at $46.80 by 7.55am GMT. The contract lost $0.27 to $44.46 on Thursday, the lowest since November 14.

Analysts said both benchmarks were dragged lower by a bigger than 4 percent drop in U.S. gasoline futures after the U.S. Energy Information Administration (EIA) reported a 2.1 million-barrel increase in gasoline inventories last week.

The crude oil bulls had been waiting for the USA driving season to spur gasoline demand, which was expected to increase the drawdown in crude oil inventory. Prices slid $1.72, or 3.5 percent, to $47 on Wednesday.

In the United States, which is not participating in any deal to reduce production, oil output has risen more than 10 per cent in the past year to 9.3 million bpd.

"Production growth in Libya and Nigeria and continued rig additions in the USA are complicating the picture, raising doubts on OPEC's strategy", AB Bernstein said, reports CNBC.

The market has not been able to sustain a rally since March, as efforts by the Organization of the Petroleum Exporting Countries and non-OPEC producer Russian Federation to reduce supply have been met with higher output from Nigeria and Libya, who are exempt from the deal, along with the United States.

The IEA said it expected growth in non-OPEC supply to be higher next year than growth in overall global demand.

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Oil stocks are near record highs in some parts of the world, and producers outside the Opec deal are increasing output. WTI is now trading at $46 per barrel and Brent at $2.3 per barrel premium to WTI.

Slight increases were prompted by a partial export halt in Libya, according to traders quoted by Reuters.

Rising U.S. oil output has undermined the impact of OPEC-led cuts.

USA output is still expected to rise by 800,000 bpd in 2017, contributing nearly all the non-OPEC gain. In addition to that, the production from OPEC, in the month of May rose by 336,000 barrels per day, thanks to Libya and Nigeria.

Canada's oil-sands will increase production rapidly in the next three years, ranking only behind USA shale as the biggest contributor to global supply growth.

The report also showed that gasoline inventories increased by 2.1 million barrels, compared to forecasts for a drop of 457,000 barrels.

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