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Oil pull back ahead of U.S. inventory data

Global oil prices surrendered earlier gains in Asia on
Wednesday, on deepening oversupply concerns after the U.S.
energy department again raised oil production estimates.

The Energy Information Administration on Tuesday said it
expects American shale producers to crank out 9.3 million
barrels a day in 2017, a slight increase from its projections
in May. It expects 2018 daily output to hit 10 million barrels,
exceeding the previous record of 9.6 million barrels a day in
1970.

Strong production out of the U.S. has been the main challenge
facing the Organization of the Petroleum Exporting Countries,
which together with a handful of non-cartel producers such as
Russia, have pledged to reduce their output by 1.8 million
barrels until March.

More than five months into the cut deal, much of the benefits
from the cuts have flowed to the U.S., where producers take
advantage of the higher prices to expand their drilling
operations. U.S. production has stayed above the 9.3 million
barrels a day level for four weeks.

Capital Economics analysts say the acceleration in U.S. oil
digging activities will soon peter out unless oil prices rise
significantly.

U.S. crude stocks, however, likely fell for the ninth
consecutive week in the week ended June 2. The Wall Street
Journal survey tips for a drawdown of 3.5 million barrels,
while estimates by industry group American Petroleum Institute
show a 4.6 million barrel decrease. Official readings by EIA
are due out later Wednesday.

On the New York Mercantile Exchange, light, sweet crude futures
for delivery in July

CLN7,
-0.12%

 traded at $48.13 a barrel, down 6 cents in
the Globex electronic session. August Brent crude

LCOQ7, -0.12%

 on London’s ICE Futures exchange dipped 4 cents to $50.09
a barrel.

OPEC’s own rising production also weighed on prices. Despite
the reported high level of compliance to the cut deal, the
cartel’s output likely rose by 270,000 barrels a day in May to
32.12 million, driven by the faster-than-expected rebound in
Nigeria and Libya, two OPEC nations exempt from the pact, said
S&P Global Platts.

“If global stocks do not start to show demonstrative signs of
steady draws, OPEC may have to be more creative with its
strategy,” said the firm.

OPEC’s next monthly report will be published on June 13.

Nymex reformulated gasoline blendstock for July

RBN7,
-1.39%

 fell 1.3% to $1.5348 a gallon , while July
diesel traded at $1.4631, 0.2% lower. ICE gasoil for June was
at $432.50 a metric ton, 1% higher from previous settlement.

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