Oil stocks dip, but gasoline inventories rise

EIA revises down oilsands reserve drop by about a third after data error

In its latest monthly report, the IEA expected a larger than expected increase in non-OPEC output of 700,000 for 2017 and the IEA also expected a further increase for 2018.

But adherence to the cuts is under scrutiny and the producer group said this week its output rose by 336,000 bpd in May to 32.14 million bpd.

USA crude inventories added 2.75 million barrels last week, while gasoline stockpiles increased by 1.79 million barrels last week, the API said Tuesday, according to people familiar with the data. Analysts had expected a decrease of 2.7 million barrels.

"The numbers cast serious, serious doubt on whether there will be another hike this year", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY.

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The news prompted Jackie DeAngelis, host of CNBC's Squawk Box, to remark, "We are supposed to be in a cutting period here, so the cheating has begun; the biggest offenders are not a surprise: Libya, Iraq, Nigeria, and here in the USA there is also a projected increase". Brazil and Canada will add output, while non-OPEC supply growth will exceed demand growth for the first time since, according to IEA data. The oil producers' organisation predicted that world oil demand in the second half of 2017 will jump by 2 million b/d over the first half, to average 97.4 million b/d, helped by a big boost from the Americas, especially the US.

The benchmarks, Brent crude oil LCOc1 was down by 45 cents a barrel and US crude CLc1 by 50 cents at $45.96. "It's a huge resource, it's changed everything", said Gary N Ross, global head of oil at energy analysts Pira, of USA shale. Some non-OPEC countries, such as Russia, Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan promised to cut output by 600,000 barrels per day, beginning from January 1, 2017.

The pullback in hedging was driven by rising service costs and expectations that prices would continue to rally after the Organization of the Petroleum Exporting Countries extended those cuts in May, analysts said.

A report from the IEA indicated that Iraq, along with other OPEC members, was being less than diligent in cutting oil production and abiding by the OPEC deal.

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United States crude production this year is expected to rise by 430,000 b/d, with production ending 2017 around 920,000 b/d higher than at year-end 2016.

Rising output from the United States has been one of the main factors behind the stubbornly high stock levels and the IEA estimates USA production will continue to grow aggressively into next year.

Supply grew by 585,000 bpd last month alone, with the rapid return of U.S. shale adding to strong gains from Opec's exempt members, Libya and Nigeria.

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