While US shale output may come "roaring back" amid higher crude prices, production curbs by Opec and its allies should help offset that increase over the next six to nine months, said the Citi analysts including Ed Morse and Seth Kleinman. But crude prices retreated Wednesday as USA output continues to rebound. OPEC and 11 other non-OPEC producers agreed to cut production by 1.2 million barrels day for the first half of this year.
A preliminary Reuters poll showed analysts expected data to show USA crude oil stocks fell in the week to April 14, building on a surprise decline the previous week.
The price increases on Thursday followed a more than 3.5 percent drop in both crude benchmarks during the previous session after the EIA reported surging gasoline inventories as well as another rise in US crude oil production to 9.25 million barrels per day (bpd), up nearly 10 percent since mid-2016. Looking at the latest price reactions, one might conclude that the only reason for the previous price rise was the expectation of further production cuts on the part of OPEC", Commerzbank (Xetra: "CBK100 - news) strategist Carsten Fritch said. American refiners typically boost operating rates at this time of year as they prepare for the summer surge in gasoline demand.
U.S. government drilling data showed shale production next month was set to rise to 5,19 million barrels per day (bpd), with output from the Permian play, the largest USA shale region, expected to reach a record 2,36 million bpd.More news: Dufner eagles twice to lead RBC Heritage
Brent for June settlement fell $1.96, or 3.6 percent, to $52.93 a barrel on the London-based ICE Futures Europe exchange. The total volume of oil that was traded hovered around 14% under the 100-day moving average.
US crude futures tumbled following the EIA data release, off $2.7% to $51 a barrel.
"The rebalancing in US crude stocks may have got under way, but concerns of further gasoline builds are rife even as the USA summer driving season shifts up a gear", said Stephen Brennock, an analyst with PVM Oil Associates.
Now the deal's participants must weigh whether another such agreement is worth it, given that any price increases would spur more USA production.More news: Chaffetz considering early departure from Congress
The continued growth in USA production and the rise in stockpiles forced the market to respond bearishly based on the increased inventory outlook.
Refineries processed 16.9 million barrels a day, up 241,000 barrels from the prior week and the highest since the record 17.1 million was touched in January.
US crude imports rose last week by 56,000 barrels per day.More news: EU's Tajani's holds talks with PM May
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