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The OPEC Reference Basket (ORB) averaged US$49.20 per barrel in May, dropping by more than 4 percent over April, to its lowest level for 2017, as the market was range-bound and bearish for most of May despite OPEC/non-OPEC’s cuts extension, the cartel said in its Monthly Oil Market Report on Tuesday.
“Oil has been weighed down by the market’s impatience with the generally slow pace of the global inventory drawdown amid a significant recovery in global oil supplies, particularly from the US,” OPEC said.
The ICE Brent/NYMEX WTI spread widened by US$0.16 to US$2.86/barrel, despite successive weeks of U.S. crude stocks draws. “This prompted more US exports, augmenting light crude availabilities in the Asia-Pacific and Europe,” OPEC noted.
However, higher seasonal demand for crude and higher refinery runs helped the contango structure to ease in all markets, OPEC said.
One of the cartel’s goals with the cuts was to flip the market to backwardation to force inventories and oil stored in tankers draw down.
The May average OPEC Reference Basket (ORB) was below US$50 per barrel for the first time since November 2016, OPEC said.
Oil prices tumbled sharply despite the extension of the output cuts, and the decision was “greeted by a sell-off, with 25 May daily WTI volumes of 1.1 million contracts the highest since the 30 November 2016 session, when OPEC first announced its production adjustments.”
Pressure on prices further increased as producers outside the deal increased output, with the U.S. continuing its 2017 upward trend, and rising output from Nigeria, Libya, and the North Sea keeping the Atlantic basin well supplied with light sweet crude, weighing on crude prices. Nigeria’s production grew to the highest in more than a year, following the restart of Forcados loadings, OPEC said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.