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Oil prices drop after three straight days of gains

Some of the pressures on global oil supply may be fading, an industry review finds.

By Daniel J. Graeber
Oil prices drop after three straight days of gains
Crude oil prices end three straight days of gains as traders assess supply and demand factors against unplanned global outages. File photo by Monika Graff/UPI | License Photo

NEW YORK, June 9 (UPI) -- The rally in crude oil prices lost steam Thursday as markets pulled back to assess short-term outages that may be driving some of the recent momentum.

The price for crude oil opened above the $50 per barrel mark Wednesday for the first time in nearly a year as strong consumer demand eats away at the glut of oil that helped drag markets lower since the middle of 2014.

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Data from the U.S. Energy Information Administration this week show commercial crude oil inventories in the country declined by 3.2 million barrels. An independent survey from industry group American Petroleum Institute found inventory levels declined by 3.6 million barrels.

The decline comes amid higher seasonal demand from consumers, who are turning to less fuel-efficient vehicles and more road travel because of cheaper gasoline prices. Fuel prices, however, are moving considerably higher alongside the price for crude oil.

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After three straight sessions of gains at or near 1 percent for oil, prices pulled back considerably at the open of trading Thursday in New York. The price for Brent crude oil fell 1.5 percent to start the day at $51.63 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, declined 1.7 percent to open at $50.34 per barrel.

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Analysis published Thursday by the EIA finds many of the negative pressure on supplies may be coming from temporary supply disruptions. From a militant campaign in Nigeria to wildfires in Canada, global disruptions last month sidelined more than 3.6 million barrels per day in oil production.

"Along with other factors such as rising oil demand and falling U.S. crude oil production, the rise in disruptions contributed to a month-over-month $5 per barrel increase in Brent crude oil spot prices in May," the report said.

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In Canada, the top crude oil exporter to the United States, wildfires disrupted on average 800,000 bpd in May, though most operations were slowly returning to normal by the end of the month. Disruptions in normal production should reverse as June progresses, the EIA's report found.

In an annual survey, British energy company BP said global demand pressures should wane because of a slowdown in major world economies.

"We are seeing a gradual deceleration in global energy consumption as the huge boost from globalization and Chinese industrialization slowly subsides," CEO Bob Dudley said in a statement.

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