Oil Prices Ease on China Demand Dip and Rising U.S. Output
Oil prices fell on Friday as weakening demand in China and surging U.S. output weighed on markets despite supply woes in Venezuela and Iran on top of OPEC's production cuts.
Brent crude futures fell 45 cents to $16.87 a barrel by 1333 GMT. U.S. West Texas Intermediate (WTI) crude futures recovered some earlier losses to trade 8 cents down at $65.87. On the week, both contracts were set to trade flat.
China's May crude oil imports eased away from a record high hit the previous month, customs data showed on Friday, with state-run refineries entering planned maintenance.
May shipments were 39.05 million tonnes, or 9.2 million barrels per day (bpd). That compared with 9.6 million bpd in April.
Further weighing on prices has been rising U.S. output <C-OUT-T-EIA>, which hit another record last week at 10.8 million bpd.
That's a 28 percent gain in two years, putting the United States close to becoming the world's biggest crude producer, edging nearer to the 11 million bpd churned out by Russia.
The surge in U.S. production has pulled down WTI into a discount versus Brent <CL-LCO1=R> of more than $11 a barrel, its steepest since 2015.
Market Still Tight
Despite Friday's falls, Brent remains more than 15 percent above its level at the start of the year.
U.S. investment bank Jefferies said the crude market is tight and spare capacity could dwindle to 2 percent of demand in the second half of 2018, its lowest level since at least 1984.
Markets have been tightened by supply trouble in Venezuela, where state-owned oil company PDVSA is struggling to clear a backlog of about 24 million barrels of crude waiting to be shipped to customers.
More generally, Brent has been pushed up by the voluntary production cuts put in place last year, led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia.
OPEC and Russia meet on June 22/23 to discuss production policy.
On Friday OPEC's third-largest producer Iran criticised a U.S. request that Saudi Arabia pump more oil to cover a drop in Iranian exports and predicted that OPEC would not heed the appeal.
"It’s crazy and astonishing to see instruction coming from Washington to Saudi to act and replace a shortfall of Iran’s exports due to their illegal sanctions,” Iran’s OPEC governor told Reuters.
By Henning Gloystein and Dmitry Zhdannikov, Additional reporting by Shadia Nasralla