Crude oil prices fell on Wednesday after industry data showed an increase in USA stockpiles, and as analysts said that US output had been surprisingly resilient in the face of lower prices.
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Crude oil declined Wednesday morning falling 43 cents to trade at 43.78 after a surprise climb in stocks as reported by the American Petroleum Institute after markets closed on Tuesday.
Middle Eastern oil producers could be restored to a dominant position they had not had since the 1970s, because low prices favour low-cost production in desert environments over high-cost drilling in hard conditions such as oceans or forested hills.
EIA estimates that total US crude oil production declined by 40,000 barrels per day in October compared with September.
Oil prices are likely to stay below $80 per barrel for another five years, according to a closely watched energy report.
Crude futures were up slightly today after EIA outlook report projected cuts by more than 20% in oil investments this year and that this trend will follow suit into next year.
US crude supplies have grown for six straight weeks as refineries have bought less crude while performing maintenance, and production has remained robust.
Venezuelan President Nicolas Maduro used the summit to push his idea of convening a meeting of world oil producers that could revive sub-$50 a barrel prices that have walloped the Venezuelan economy.
“The huge crude-oil build [reported by the API] weighs on oil prices along with mediocre Chinese economic data this morning…which keeps alive the fear of a growth slowdown in the huge country”, said Michael Poulsen, oil analyst at Global Risk Management.
From a broad perspective we can assume that prices have not yet reached the bottom as global supply far exceeds demand. Many governments sell oil to gas stations for less than market price, allowing consumers to pay less at the pump. The previous estimate for 2016 was 8.86 million barrels a day.
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The oil market is also looking for any indicators from Opec over its production policy. In this scenario, OPEC continues to pursue market share, USA shale remains resilient, and the global economy doesn’t perform as well as expected.
