Oil slides on worries Middle East rift will undermine output cuts

Oil slides on worries Middle East rift will undermine output cuts

Overnight, crude futures settled sharply lower, after data on Wednesday showed that supplies of USA crude rose for the first time in nine weeks, adding to concerns that rising United States oil output would undermine Opec and its allies' efforts to curb supply. West Texas Intermediate light sweet crude futures were trading at just above $46 a barrel. Gasoline inventories rose by about the same amount.

USA stockpiles of crude oil and gasoline rose last week, reversing recent declines and weighing on oil prices.

Lower crude oil prices have a negative impact on oil and gas producers' earnings like Noble Energy (NBL), Sanchez Energy (SN), and Goodrich Petroleum (GDP).

Qatar with a production capacity of about 600,000 barrels per day (bpd) is one of OPEC's smaller oil producing nations.

"Political disputes between OPEC members are nothing new, but history has shown that shared economic interests to keep supply discipline has trumped other interests", said Vivek Dhar, a commodities strategist at the Commonwealth Bank of Australia.

Shortly after 1 p.m. ET, the July contract for West Texas Intermediate crude, the North American benchmark, was down $2.31 to $45.88 U.S. a barrel.

The concern is that that spat will lead the OPEC members to disregard their production-cutting agreement. US oil exports have surged the past six months from 442,000 barrels a day in December. Brent crude prices fell $2.06, or 4 percent, to settle at $48.06 a barrel. Brent is about 8 percent below its open on May 25, when OPEC and other producers agreed to extend oil output cuts through to the first quarter of 2018.

Oil prices fell more than 4% Wednesday, shortly after a 10:30 a.m. report from the U.S. Energy Information Administration showed domestic crude inventories rose by 3.3 million barrels in the past week.

According to Vivek Dhar, mining and energy analyst at the Commonwealth Bank, this saw concerns surrounding oversupply in the United States market intensify, leading to the enormous selloff in WTI crude futures.

Oil halted gains as US industry data showed gasoline stockpiles expanded, countering expectations of a seasonal decline and a decrease in crude inventories.

Despite the rebound in oil prices, Kilduff said prices need to rise significantly higher to post a close that would signal oil bulls are in control of the market.

U.S. crude output has jumped more than 10 percent since mid-2016 to 9.34 million bpd, industry figures show.

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