Oil slides on worries Middle East rift will undermine output cuts

Extension of oil output cut deal to be supportive for prices - Wood Mackenzie

Oil Prices Dip On Concerns Over Qatar Rift On OPEC Cuts

Oil has traded below $50 a barrel amid speculation that rising USA supply will counter an extension of production curbs by Opec and its partners, including non-Opec member Russian Federation.

This week's draw, according to the API, is the seventh week of draws in the last 10 weeks, with a total draw of nearly 27 million over the last ten weeks.

Commercial crude oil inventories in the States grew by 3.3m barrels during the week ending on 2 June (consensus: -3.5m) to reach 513.2m barrels, according to the Energy Information Administration, the US Department of Energy's statistical arm. Market watchers were actually hoping that OPEC would deepen the cuts or agree on an outright production freeze in order to force a balance on the demand-supply dynamics of oil.

"The Minister has sent the OPEC a letter on May 24 with a condition that OPEC will not cut (Indonesia's) domestic oil protection in consideration of already declining production", Sujatmiko said. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.39% at $48.01 a barrel.

Opec has pledged to cut nearly 1.8-million barrels per day to help reduce global inventories.

Oil prices edged upward Tuesday, finding technical support after sliding below US$47 (RM201) a barrel on pressure from a diplomatic rift in the Middle East and sustained high crude inventories in the United States.

CNN reported late last month, however, that the entire spat with Qatar was sparked by a fake news report by Russian hackers.

After OPEC has made a decision to a further nine-month production cut, Michael Burns, oil and gas partner at Ashurst, commented, "The key question is, once again, how United States shale producers respond to any price increase".

US crude futures fell 4.6 percent, or $2.23 a barrel, to $45.96 a barrel, as of 11:18 a.m. EDT (1518 GMT).

Oil halted gains as USA industry data showed gasoline stockpiles expanded, countering expectations of a seasonal decline and a decrease in crude inventories.

With (Other OTC: "WWTH - news) gasoline now the seasonal leader of the complex, its weakness is dragging everything down", said John Kilduff, partner at Again Capital in NY.

The upward movement on gasoline inventories was a disappointment, climbing 4.08 million barrels this week, according to the API.

US light crude CLc1 was down 20 cents at $47.20.

The split between Qatar and four other Gulf countries could make OPEC's goal of rebalancing the crude market even more hard.

"The relentless increase in USA oil production appears to have the market anxious that the OPEC cuts will be completely nullified by the increased U.S. production", said William O'Loughlin, analyst at Rivkin Securities. The global benchmark crude traded at a premium of $1.83 to WTI for the same month.

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