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UPDATE 2-Oil edges lower on high fuel inventories, industry efficiency

Published 14/07/2017, 05:13 pm
© Reuters.  UPDATE 2-Oil edges lower on high fuel inventories, industry efficiency
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* OPEC's compliance with its production curbs has slipped -bank

* OPEC needs to cut more deeply to achieve higher prices -analysts (Recasts, updates prices)

By Henning Gloystein and Aaron Sheldrick

SINGAPORE, July 14 (Reuters) - Oil markets edged lower on Friday amid high fuel inventories and improving industry efficiency, but remained on track for a solid weekly gain,

Brent crude futures LCOc1 , the international benchmark for oil prices, were down 19 cents, or 0.4 percent, at $48.23 per barrel at 0709 GMT. They have risen about 3.5 percent so far this week.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $45.93 per barrel, down 15 cents, but heading for a 3.8-percent gain over the week.

Crude prices are still around levels in late November last year, when a group of oil producers including Russia and Organization of the Petroleum Exporting Countries (OPEC) pledged to withhold around 1.8 million barrels per day (bpd) of output between January this year and March 2018 to tighten the market.

"OPEC compliance with production cuts slipped to 98 percent in June, but more importantly output from exempt (from cutting)members Libya and Nigeria is currently about 700,000 bpd higher than at the time of the November OPEC agreement, offsetting about 60 percent of the OPEC cuts. The growth in U.S. production over the same time negates the remainder," U.S. investment bank Jefferies said.

U.S. oil production C-OUT-T-EIA has risen by more than 10 percent over the past year to 9.4 million bpd.

Oil analysts at research and brokerage firm Sanford C. Bernstein said that global oil stocks remain high.

"For the first half of 2017, OECD inventories are likely to finish higher, rather than lower ... The most plausible explanation is that OPEC compliance has been not as high as has been suggested," Bernstein said.

"OPEC will have to cut deeper and for longer if it wants to eliminate the inventory overhang and prices to rise," Bernstein said.

It added that the upside for oil prices looked limited even if OPEC took more action due to high U.S. shale production.

Goldman Sachs (NYSE:GS) said that the crude oil price outlook remained weak, largely due to rising cost efficiency from U.S. shale drillers.

"We see potential for shale to break even at $45 ... (and) we see $45-$55 per barrel annual WTI range," the U.S. investment bank said.

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