Commodities: Crude veers heavily lower as Libya output surges

June 1 USA crude stocks fell sharply last week, driven by a surge in refining and exports to record highs, while gasoline inventories also dropped sharply ahead of the start of the summer driving season, the Energy Information Administration said on Thursday.

Crude oil prices were flat to slightly lower in early Thursday trading as consumer demand issues balance against a large draw in oil inventories. The American Automobile Association (AAA) is predicting a heavier than normal us driving season; expecting that cheap gasoline and a stronger American economy will have more motorists hitting the highways.

Industry data on USA oil inventories from the American Petroleum Institute (API) late on May 31 was seen buoying prices.

U.S. West Texas Intermediate crude futures were up 38 cents at $48.71 a barrel.They dropped $1.34, or 2.7 percent, in the previous session to settle at $48.32 per barrel, the lowest close since May 12.

Libya's oil production is expected to rise to 800,000 barrels per day (bpd) this week, state-run National Oil Corporation said on Monday.

OPEC and Russian Federation initially agreed to production cuts in late 2016, but chose to extend those cuts another nine months at a meeting in Vienna last month.

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Global benchmark Brent crude futures were down 39 cents, or 0.77 percent, at $50.25 a barrel at 0039 GMT.

Libya, an OPEC nation that's exempt from the production-cut deal, is said to have increased its output to 3-year highs of late.

Ultimately, prices rather than planned cuts will rebalance the market, which will most likely require a period of flat or lower prices to curb shale growth and ensure USA output does not outstrip demand.

The major issue for Oil markets is with United States shale's relentless output and resistance to low prices, OPEC are being forced into record levels of cooperation with partners and non-OPEC partners (such as Russia) to try and dent the seemingly endless supply of Oil that has crushed the price in recent times. Iran was allowed a small increase in the OPEC agreement and, having sold the oil it had held in floating storage, appears to have reached a short-term peak.

"A decrease in production under an agreement between OPEC and non-OPEC could largely be balanced out by an increase in US shale oil production by the middle of 2018", Rosneft Oil Co.

The UAE, with lower compliance than other Gulf producers, has said suggestions that it is failing to comply fully can be explained by the gap between its own figures and those estimated by the secondary sources that OPEC uses to track compliance. Brent traded near $49 a barrel on the ICE Futures Europe exchange in London on Friday.


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