BLBG: Oil Falls for First Time in Seven Days as OPEC Output Increases
Crude oil fell for the first time in seven days after the Organization of Petroleum Exporting Countries and Russia raised production in May.
OPEC oil output climbed 1.5 percent to an average 28.15 million barrels a day last month, according to a Bloomberg News survey. Russia’s oil production in May advanced for the third straight month, a government report showed. The U.S. Energy Department is forecast to say tomorrow that supplies dropped.
“As we approach $70 there’s a need for bullish data on a daily basis,” said John Kilduff, senior vice president of energy at MF Global in New York. “The rally was a little long in the tooth. We are getting the first up-tick in OPEC production for a long time.”
Crude oil for July delivery fell 28 cents, or 0.4 percent, to $68.30 a barrel at 10:53 a.m. on the New York Mercantile Exchange. Yesterday, oil closed at $68.58 a barrel, the highest settlement since Nov. 4. Prices are up 53 percent this year.
Futures climbed yesterday on expectations that fuel demand will increase as the economy improves later this year. The Institute for Supply Management’s U.S. factory index rose to 42.8 from 40.1 in April and China’s Purchasing Manager’s Index showed manufacturing in May gained for a third month.
“The oil market has gotten ahead of itself based on strong equities and the weak dollar,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. “With low demand, ample supply, and high inventories, we expect oil-market conditions are ripe for a pullback in prices.”
OPEC’s oil production rose an average 405,000 barrels a day in May, according to the Bloomberg News survey of oil companies, producers and analysts. The 11 OPEC members with quotas, all except Iraq, pumped 25.76 million barrels a day, 915,000 more than their target.
Russian Production
Russia’s oil output in May advanced 0.9 percent after OAO Lukoil started producing at an Arctic field with ConocoPhillips in the second half of last year. Oil flows increased to 9.84 million barrels a day from 9.75 million in the same month a year earlier, the Energy Ministry’s CDU-TEK unit said in a statement.
U.S. crude-oil stockpiles probably dropped 1.5 million barrels in the week ended May 29 from 363.1 million the previous week, according to the median of 14 estimates by analysts before an Energy Department report tomorrow. Inventories are likely to have fallen as refiners increased operations to meet demand during the summer driving season.
Inventories of gasoline and distillate fuel, a category that includes diesel and heating oil, rose last week, according to the survey.
Excess Supply
The global oversupply of crude oil will clear by the end of the year as an economic recovery spurs demand, said OPEC Director of Energy Research Hasan Qabazard. There are more than 200 million barrels of excess oil in the market in addition to 130 million barrels held on tankers at sea, Qabazard said today at a conference in Abu Dhabi.
Qabazard said he expects the global economy to recover in the second half of the year, adding that the direction of the market is “optimistic.”
Brent crude for July settlement rose 2 cents to $67.99 a barrel on London’s ICE Futures Europe exchange.
