Oil down on record USA crude stocks, flat Russian output

Miranda GreerMar 05, 2017

Crude oil dropped as concern over record high US crude inventories offset optimism that OPEC and its allies have been following through to cut production.

Oil prices were also pressured by the USA dollar rising on increasing odds of an interest rate rise by the Federal Reserve as early as later this month.

It is too early to decide whether to extend OPEC's global deal on oil output cuts into the latter part of 2017, Russian Energy Minister Alexander Novak told Reuters.

Benchmark Brent crude oil fell $1.06 a barrel (bbl) to a low of $55.30, before recovering to around $55.70 by 8:45 a.m. CT (14:45 GMT).

Libya and Nigeria are members of Organization of the Petroleum Exporting Countries who were exempted from the production cut agreement between OPEC and other major producers that kicked in at the start of the year.

In the end, however, OPEC will be faced with a familiar dilemma: sacrifice market share to protect prices or defend market share and allow prices to find their own level. On the opposite side, however, is OPEC's compliance with its cuts, which improved to 94% in February from 82% in January, according to a Reuters report. Gasoline inventories decreased by 0.5 million barrels last week, while distillate fuel inventories decreased by 0.9 million barrels last week.

"Full compliance with production cuts are not showing up in lower exports for numerous OPEC countries", he said.

Analysts say the weekly USA rig count data slated for release later will a be key price mover to watch. The rise in US crude oil production can pressure crude oil (IEZ) (USO) (FENY) prices.

Production averaged nearly 9 million barrels per day (bpd) in the four weeks to February 24, according to the latest weekly estimates published by the Energy Information Administration.

Away from the oil market, precious metals continued to register massive slides as the dollar remained strong, with gold sliding below $1,235 an ounce from $1,250-levels earlier in the week. The April traded at $2.788 per million British thermal units, down 1.6 cents, or 0.6%.

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