Lower US Oil Inventories Spur A Small Rally In Crude Prices (USO)

Oil jumps on Mideast tensions London attacks hurt sterling stocks subdued

Oil jumps on Mideast tensions London attacks hurt sterling stocks subdued

Benchmark Brent crude oil rose 41 cents a barrel to $49.88.

The New York Mercantile Exchange July West Texas Intermediate crude edged 0.6% lower or 26 cents on Monday closing at $47.50 per barrel following growing concerns on Middle East oil production caused by the recently severed ties with Qatar and a number of Middle East states and countries.

The amount of oil US exporters sent overseas climbed to 1.3 million barrels a day late last month, according to Energy Department data.

The U.S. oil producers have added rigs in their operations for a 20th consecutive week, raising concerns that U.S. shale oil producers which were able to cut their production cost dramatically over the past years are now a low-priced global competitor and would continue to undermine the OPEC agreement to cut supplies.

Making their fortnightly revision in fuel prices on June 1, state-run oil marketing companies in India raised the price of petrol by Rs 1.23 per litre, and of diesel by 89 paise, excluding state levies.

A campaign by leading Arab nations, including Saudi Arabia, Egypt and the United Arab Emirates, to isolate Qatar is disrupting trade in commodities, including oil.

Still, Standard Chartered analysts said their market balance projections indicated a 1.4 million barrels a day global supply deficit in the second half of the year, even allowing for a rapid increase in USA output.

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The U.S. Energy Information Administration report on oil inventories is due this week on Wednesday at 10:30 a.m. EDT.

Marex Spectron said that the demand outlook for coming weeks from refineries was strong, also supporting prices.

Commenting on the data, Thomas Pugh at Capital Economics pointed out a 1.7m barrel draw from the Strategic Petroleum Reserve, which in his opinion offset some of the impact from rising commercial inventories.

Crude prices continued on their downward spiral following the OPEC cartel's decision last month to extend output cuts. Oil fell by more than 4% last week, the largest weekly decline since early May, after investors were disappointed that the Organization of the Petroleum Exporting Countries didn't deepen its production cuts at their meeting on May. 25.

"In terms of oil flows it doesn't change very much but there is a wider geopolitical impact one needs to consider", Jakob added, explaining that a breakdown in relations between Qatar and Saudi Arabia could weaken the OPEC-led agreement on production cuts.

There are already doubts the effort to curb production by nearly 1.8-million barrels per day is seriously denting actual exports. USA oil exports have surged the past six months from 442,000 barrels a day in December.

Market participants will be watching to see if Qatar, a member of OPEC, decides to disrupt the production cutback deal.

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