Oil Holds Losses Below $45 on Surprise US Gasoline Supply Gain

While this would not affect global inventories, restricting the amount of oil coming into the U.S. should theoretically bring down inventories in the much-watched market, if it weren't for Iraq's increased oil exports to the US.

U.S. West Texas Intermediate crude futures fell almost 4 percent, plunging to a five-week low below $45 a barrel, following the report.

Top producer Russian Federation, not an OPEC member but which signed up to the deal to cut output, is expected to export 61.2 million tonnes of oil via pipelines in the third quarter, equivalent to about 5 million bpd, against 60.5 million tonnes in the second quarter, according to industry sources and Reuters calculations.

The IEA expects oil supplies next year to outpace demand despite consumption hitting 100 million bpd for the first time.

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"Should OPEC solve the problem of the overhang this year, it is just going to come back next year, so in any case their options are quite limited", said Mr. Weinberg.

Though the U.S. crude oil inventories fell by 1.66 million-barrels, the decrease was below the analyst expectations of 2.45 million barrels of drawdown.

The U.S. Energy Information Administration projects U.S. production will rise by a further 680,000 bpd in 2018. Oil prices pared gains on June 13 after the release of the report to trade towards $48/bbl, below the $60 level that top OPEC producer Saudi Arabia would like to see and less than half the level of mid-2014.

"OPEC 2017 year-to-date exports are only down by 0.3 million barrels per day (bpd) from the October 2016 baseline", analysts at AB Bernstein said in a note to clients. More specifically for oil, there are signs of a slowdown in China, long the key driver in fuel demand growth, as its economy slows down and refiners have produced far too much fuel for the market to consume, forcing a slowdown in activity.

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Nevertheless, dynamic growth in output in the United States, particularly by shale producers, seems to be slowing down the rebalancing process. Prices are down 1.6 percent this week. UAE produced more than its targeted production.

Crude prices will need to remain relatively low until more of the hedges have expired, private equity funding has slowed and drilling moderates to a more sustainable pace.

Oil headed for the longest run of weekly losses since August 2015 as OPEC member Libya restored production just as the surplus in the US showed few signs of abating.

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