The Energy Information Administration (EIA) revealed that domestic crude supplies rose again, by 1.1mln barrels, dashing hopes that the figures would show the first decline in stockpiles in two weeks.
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The agency now expects USA oil output to fall by 700,000 barrels per day this year to 8.73 million bpd, compared with the 820,000-bpd drop it previously forecast.
Global oil stockpiles stand above average levels following years of robust production in the USA and elsewhere.
On the New York Mercantile Exchange, a barrel of West Texas Intermediate for September delivery fell US$1.06 to US$41.71. Brent, the global benchmark, declined 93 cents, or 2.1%, to $44.05 a barrel on ICE Futures Europe.
Nearly all of the decline in USA oil production has been onshore in the Lower 48, while offshore production in the Gulf of Mexico increased.
“We do feel that any further strength in the spot price will be met with selling”, said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in NY.
The EIA says oil production is expected to begin rising in late 2017 due in part to higher forecast oil prices and improvements in drilling productivity.
“U.S. oil production has stabilized and inventories remain relatively high”, said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, which oversees $133 billion in assets, in a note.
And as if to drive home this point, OPEC stated in its monthly report that the weak demand for global oil may persist, considering the fact that prices have crashed through the roof in a three-month low. Non-OPEC supply that contracted by an average of 790,000 barrels a day in 2016 driven by higher-than-expected output in the second quarter in the U.S. and United Kingdom will declined by only 150,000 barrels a day in 2017, while OPEN production will grow by 160,000 barrels in 2016 and 150,000 barrels in 2017.
Saudi Arabia, OPEC’s top exporter, raised its production to 10.67 million barrels per day in July, a record high.
OPEC said Monday that the group will meet informally in September to discuss a response to low prices. The market is skeptical that the meeting will yield an agreement, as recent talks about potential production freezes fell apart.
According to Andy Lipow of Lipow Oil Associates, trading also reflected investors’ short covering.
The announcement was seen as a hint OPEC could take action to stabilise the crude market, amid rumours it may freeze output.
USA gasoline futures RBc1 fell 3 percent, after initially gaining 1 percent on the gasoline draw data. Diesel futures fell 1.23 cents, or 0.9%, to $1.3184 a gallon.
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Summer Said and Jenny W. Hsu contributed to this article.
