Trump’s revenge: U.S. oil floods Europe, hurting OPEC and Russia

FILE PHOTO: A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015. REUTERS/Nick Oxford/File Photo

By Olga Yagova and Libby George

MOSCOW/LONDON (Reuters) – As OPEC’s efforts to balance the oil market bear fruit, U.S. producers are reaping the benefits – and flooding Europe with a record amount of crude.

Russia paired with the Organization of the Petroleum Exporting Countries last year in cutting oil output jointly by 1.8 million barrels per day (bpd), a deal they say has largely rebalanced the market and one that has helped elevate benchmark Brent prices <LCOc1> close to four-year highs.

Now, the relatively high prices brought about by that pact, coupled with surging U.S. output, are making it harder to sell Russian, Nigerian and other oil grades in Europe, traders said.

“U.S. oil is on offer everywhere,” said a trader with a Mediterranean refiner, who regularly buys Russian and Caspian Sea crude and has recently started purchasing U.S. oil. “It puts local grades under a lot of pressure.”

U.S. oil output is expected to hit 10.7 million bpd this year, rivaling that of top producers Russia and Saudi Arabia.

In April, U.S. supplies to Europe are set to reach an all-time high of roughly 550,000 bpd (around 2.2 million tonnes), according to the Thomson Reuters Eikon trade flows monitor.

In January-April, U.S. supplies jumped four-fold year-on-year to 6.8 million tonnes, or 68 large Aframax tankers, according to the same data.

Trade sources said U.S. flows to Europe would keep rising, with U.S. barrels increasingly finding homes in foreign refineries, often at the expense of oil from OPEC or Russia.

In 2017, Europe took roughly 7 percent of U.S. crude exports, Reuters data showed, but the proportion has already risen to roughly 12 percent this year.

Top destinations include Britain, Italy and the Netherlands, with traders pointing to large imports by BP, Exxon Mobil and Valero.

Polish refiners PKN Orlen and Grupa Lotos and Norway’s Statoil are sampling U.S. grades, while other new buyers are likely, David Wech of Vienna-based JBC Energy consultancy said.

“There are a number of customers who still may test U.S. crude oil,” Wech said.

The gains for U.S. suppliers could come as a welcome development for U.S. President Donald Trump, who accused OPEC on Friday of “artificially” boosting oil prices.

“Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea. Oil prices are artificially Very High! No good and will not be accepted!” Trump wrote on Twitter.

‘KEY SUPPLY SOURCE’

While the United States lifted its oil export ban in late 2015, the move took time to gain traction among Europe’s traditional refineries, which were slow to diversify away from crude from the North Sea, West Africa and the Caspian.

“European refiners started experimenting with U.S. crude last year,” said Ehsan Ul-Haq, director of London-based consultancy Resource Economics. “Now, they know more than enough to process this crude.”

U.S. oil gained in popularity, sources said, in part because of the wide gap between West Texas Intermediate, the U.S. benchmark, and dated Brent, which is more expensive and sets the price for most of the world’s crude grades.

This gap, known as the Brent/WTI spread, has averaged $4.46 per barrel this year, nearly twice as high as the year-earlier figure, Reuters data showed.

Wech of JBC Energy said the spread would likely persist in the near future.

The most popular U.S. grades in Europe are WTI, Light Louisiana Sweet, Eagle Ford, Bakken and Mars.

Prices for alternative local grades have been slashed as a result.

CPC Blend differentials recently hit a six-year low versus dated Brent at minus $2 a barrel. Russia’s Urals also came under pressure despite the end of seasonal refinery maintenance. BFO-CPC BFO-URL-BFO-URL-NWE

WTI was available at 80-90 cent premiums delivered to Italy’s Augusta, well below offers of Azeri BTC at a premium of $1.60 a barrel, according to trading sources.

U.S. oil is even edging out North Sea Forties, which is produced in the backyard of the continent’s refineries.

Cargoes of WTI were offered in Rotterdam at premiums of around 50-60 cents a barrel above dated Brent, cheaper than Forties’ premium of 75 cents to dated.

(Additional reporting by Julia Payne and Devika Krishna Kumar; Editing by Dale Hudson)

Oil touches three-month lows as U.S. supply swells

FILE PHOTO: An oil pump jack pumps oil in a field near Calgary, Alberta, Canada

By Jessica Resnick-Ault

NEW YORK (Reuters) – Oil hovered around three-month lows on Monday, as rising inventories and drilling activity in the United States, the world’s top energy consumer, offset optimism over OPEC’s efforts to restrict crude output and reduce a global glut.

After more than two months of reduced production from the Organization of the Petroleum Exporting Countries, the market is facing evidence that U.S. production remains high and global markets remain oversupplied.

“There is growing skepticism that the production cut has been enacted long enough to take care of the overhang,” said Gene McGillian, director of market research at Tradition Energy. “The longs who piled in last year are turning on the market because there seems to be a realization that a six-month agreement isn’t long enough to rebalance the market.

Brent crude futures fell 7 cents to $51.30 a barrel by 11:33 a.m. Eastern (1633 GMT), having earlier hit a session low of $50.85, its lowest level since Nov. 30.

U.S. West Texas Intermediate crude (WTI)  fell 20 cents to $48.29 a barrel, a 0.4 percent loss.

Prices have fallen by more than 8 percent since last Monday, its biggest week-on-week drop in four months, and analysts said the slide may not have much further to run.

Goldman Sachs said in a note it remained “very confident” about commodity prices and maintained its price forecast of $57.50 for WTI in the second quarter.

The slide could be the result of traders unwinding bullish long positions, and could slow as those positions are unwound, Tradition Energy’s McGillian said.

U.S. drillers added oil rigs for an eighth consecutive week, Baker Hughes data showed on Friday, and they have announced ambitious production growth plans as they rebound from a two-year price war with OPEC. [RIG/U]

OPEC and other major oil producers, including Russia, reached an agreement at the end of November to rein in production by almost 1.8 million barrels per day (bpd) in the first half of 2017.

Russia’s top oil major Rosneft warned that a recovery in U.S. oil output may deter OPEC and non-OPEC producers from extending production cuts beyond June and might lead to a new price war.

Although OPEC states have been complying with supply curbs, led by Saudi Arabia, it has not been enough to overshadow a rise in U.S. inventories to a new high. [EIA/S]

“It will be interesting to see how OPEC rhetoric will evolve with this price correction. Is price the only consideration when it comes to the decision of extending cuts?” BNP Paribas global head of commodity strategy Harry Tchilinguirian told the Reuters Global Oil Forum.

He added that OPEC’s task was more difficult as it aimed to cut inventory levels rather than simply target a specific price.

Money managers cut their net long positions in U.S. crude futures and options in the week to March 7.

(Additional reporting by Jane Chung in Seoul, Keith Wallis in Singapore and Amanda Cooper in London; Editing by Marguerita Choy and Greg Mahlich)

Oil Rises but growing U.S. output threatens Rally

A natural gas flare on an oil well pad burns as the sun sets outside Watford City, North Dakota

By Amanda Cooper

LONDON (Reuters) – Oil edged up on Monday, as investor optimism over the effectiveness of producer cuts encouraged record bets on a sustained price rise, although growing U.S. output and stubbornly high stockpiles kept price gains in check.

Brent futures were up 28 cents at $56.09 a barrel at 1448 GMT, while U.S. West Texas Intermediate crude was up 23 cents at $53.63.

Investors have certainly taken OPEC members at their word on their commitment to cut production and now hold more crude futures and options than at any time on record.

But evidence of rising output in the United States has tempered money managers’ appetite to push prices higher. Since the start of the month oil prices have gained around $2.

“There is still a general consensus that the OPEC/non-OPEC agreement helps supply to get in line with demand. This bullish stance is countered by the ever-increasing inventories in the U.S. and rising rig counts,” PVM Oil Associates strategist Tamas Varga said in a note.

The Organization of the Petroleum Exporting Countries and other producers, including Russia, agreed last year to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017.

Estimates indicate compliance with the cuts is around 90 percent, while Reuters reported last week that OPEC could extend the pact or apply deeper cuts from July if global crude inventories fail to drop enough.

Top OPEC exporter Saudi Arabia’s crude oil shipments fell in December to 8.014 million bpd from 8.258 million bpd in November, official data showed on Monday.

“Sustained gains above $55 a barrel, and a hoped-for rally to $60 a barrel, (are) both proving incredibly tough nuts to crack,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

“At the crux of the matter is that 90 percent OPEC compliance is being balanced by ever increasing U.S. shale production,” he added.

U.S. energy companies added oil rigs for a fifth consecutive week, Baker Hughes said on Friday, extending a nine-month recovery with producers encouraged by higher prices, which have largely traded above $50 a barrel since late November.

“Assuming the U.S. oil rig count stays at the current level, we estimate U.S. oil production would increase by 405,000 (barrels per day, or bpd) between fourth quarter 2017 and fourth quarter 2016 across the Permian, Eagle Ford, Bakken and Niobrara shale plays,” Goldman Sachs said in a research note.

The U.S. market will be closed on Monday for the Presidents Day holiday.

(Additional reporting by Henning Gloystein in SINGAPORE and Aaron Sheldrick in TOKYO; Editing by Louise Heavens/Ruth Pitchford)

Oil prices rise as Middle East producers confirm supply cuts

A motorist holds a fuel pump at a Gulf petrol station in London Apri

By Sabina Zawadzki

LONDON (Reuters) – Oil prices rose on Tuesday, supported by strong demand in Asia and supply cuts by Abu Dhabi, Kuwait and Qatar as part of production curbs organized by OPEC and other exporters.

But traders said the market was pressured by investors closing financial positions that profited from strong gains the day before.

International Brent crude and U.S. West Texas Intermediate  flirted with negative territory in early European trading. By 1420 GMT, Brent was up 40 cents at $56.09 a barrel, while WTI was up 34 cents $53.17.

Traders said there was significant profit-taking after oil shot to mid-2015 highs earlier this week following a deal reached by the Organization of the Petroleum Exporting Countries and other exporters led by Russia to cut output by almost 1.8 million barrels per day (bpd).

But they added that oil markets were still broadly supported by the arrangement to crimp output.

“The market is putting a lot of importance on the commentaries coming out of OPEC and non-OPEC (and) the market is giving OPEC the benefit of the doubt that cuts will be implemented and achieved,” said Michael McCarthy, chief market strategist at Sydney’s CMC Markets.

However, analysts warned prices would turn fast if the market believed compliance was lacking.

“The plan was designed on Nov. 30. The foundation was laid down on Dec. 10. The construction will start on Jan. 1. The following three to six months will provide us with an answer as to whether the foundation is strong enough to hold the building or will it collapse like a house of cards,” PVM analysts wrote.

In a sign that producers are acting on their plans to cut output, Abu Dhabi National Oil Co told customers it would reduce Murban and Upper Zakum crude supplies by 5 percent and Das crude exports by 3 percent.

Kuwait Petroleum Corp notified customers of a cut in contractual crude supplies for January, as did Qatar Petroleum.

Meanwhile, China’s November crude output fell 9 percent from a year earlier to 3.915 million bpd, data showed on Tuesday. Production recovered from October’s 3.78 million bpd, however, which was the lowest in more than seven years.

China’s refinery throughput hit a record in November of 11.14 million bpd, up 3.4 percent year-on-year.

“Declines in Chinese … crude oil output and expansion of its strategic crude reserves underpin our view for China’s crude oil imports to strengthen,” BMI Research said.

In India, fuel demand rose 12.1 percent year-on-year in November.

(Additional reporting by Henning Gloystein and Keith Wallis in Singapore; Editing by Dale Hudson and Louise Heavens)

OPEC officials debate thorny issue of how to implement supply cut

OPEC logo is pictured ahead of an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria

By Alex Lawler

VIENNA (Reuters) – OPEC officials began talks in Vienna on Friday aimed at working out details of their oil supply-cut agreement, which they concede is looking more complicated by the day.

The meeting of the High Level Committee is comprised mainly of OPEC governors and national representatives – officials who report to their respective ministers. Talks were continuing five hours after they started at 10 a.m. local time (0400 ET).

Last month in Algiers, the Organization of the Petroleum Exporting Countries agreed to reduce production of crude oil to a range of 32.50 million to 33.0 million barrels per day, its first output cut since 2008, to prop up prices.

The deal faces potential setbacks from Iraq’s call for it to be exempt and from countries including Iran, Libya and Nigeria whose output has been hit by sanctions or conflict and want to raise supply.

“It is getting complicated,” an OPEC delegate said before the meeting began on Friday. “Every day there is a new issue coming up.”

Even so, other OPEC officials including Secretary-General Mohammed Barkindo have said they are optimistic a final deal will be reached.

“Our deliberations today – and tomorrow with some non-OPEC producers – could very well have fundamental ramifications for the market, as well as for the medium to long term of the industry,” Barkindo said in a speech at the meeting, according to a text provided by OPEC.

The committee does not decide policy and will instead make recommendations to the next OPEC ministerial meeting on Nov. 30, also in Vienna.

How much each of the 14 OPEC members will produce is one of the matters the committee is examining.

Iraq, OPEC’s No. 2 producer, said this week that it would not cut output and should be exempted from any curbs as it needs funds to fight Islamic State.

Baghdad’s stance is likely to face opposition from other OPEC members, an OPEC source said on Friday. Riyadh and its Gulf OPEC allies do not agree with Iraq’s view, sources said on Thursday.

The meeting is scheduled to continue for a second day on Saturday when representatives from non-OPEC nations, which OPEC wants to curb supplies as well, will also attend.

Non-OPEC nations sending representatives to Saturday’s talks are Russia, Kazakhstan, Mexico, Oman, Azerbaijan, Brazil and Bolivia.

(Reporting by Alex Lawler; Editing by Dale Hudson)

Oil rises above $50 a barrel on OPEC cut comments

A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma

By Alex Lawler

LONDON (Reuters) – Oil edged above $50 a barrel on Thursday, drawing support from sources’ comments that OPEC’s Gulf members are willing to cut their output by 4 percent and from a further drop in U.S. crude inventories.

Saudi Arabia and its Gulf OPEC allies are willing to make that reduction from their peak oil output, energy ministers from the Gulf countries told their Russian counterpart this week, sources familiar with the matter told Reuters.

“That seems to be the reason behind the price move,” said Carsten Fritsch, analyst at Commerzbank. “But the big question is, how will they handle Iraq.”

Brent crude was up 38 cents at $50.36 a barrel as of 0948 ET, having risen as high as $50.67 intra-day. U.S. crude gained 28 cents to $49.46.

Oil also drew support from the unexpected drop in U.S. crude inventories, and larger than expected falls in stocks of gasoline and distillates, reported this week, which raised hopes that a long-awaited market rebalancing is finally under way.

“The global stock overhang must be reduced in order to see higher prices. Whilst such reduction is largely in the hand of OPEC, the re-balancing is already taking place in the U.S.,” Tamas Varga of oil broker PVM said.

The market was keeping an eye on escalating protests in Venezuela against the rule of President Nicolas Maduro, although there was no sign of any impact on the OPEC member’s oil output. Venezuelan production has been falling this year as low prices hit investment.

Doubts about the Organization of the Petroleum Exporting Countries’ supply cut deal have been weighing on the market this week.

OPEC agreed last month its first deal to restrain output in eight years to boost prices. But Iraq on Sunday called for Baghdad to be exempt, adding to the list of members seeking special treatment.

A technical meeting at OPEC’s headquarters on Friday, and with officials from non-OPEC countries on Saturday, is supposed to come up with recommendations on how to implement the supply cutback to the oil ministers’ next meeting on Nov. 30.

The OPEC plan is designed to speed up the removal of a supply glut that is keeping oil prices at less than half their level of mid-2014, cutting exporters’ income and leading to investment cuts by oil companies worldwide.

(Additonal reporting by Henning Gloystein; Editing by William Hardy

Oil prices fall back from one year highs hit by OPEC deal concerns

A worker checks the valve of an oil pipe at an oil field owned by Russian state-owned oil producer Bashneft near the village of Nikolo-Berezovka, northwest of Ufa, Bashkortostan, Russia

By Amanda Cooper

LONDON (Reuters) – Oil fell back from one-year highs on Tuesday, knocked by concerns that a production cut by the world’s largest exporters might not be enough to erode a two-year old global surplus of unwanted crude oil.

Oil prices jumped as much as 3 percent on Monday, after Russia and Saudi Arabia both said a deal between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members like Russia in curbing crude output was possible.

December Brent crude oil futures were down 42 cents at $52.72 a barrel by 1100 GMT, below Monday’s one-year high at $53.73, but off an intraday low at $52.51, while U.S. futures were down 43 cents at $50.92 a barrel.

Global oil supply could fall into line more quickly with demand if OPEC and Russia agree to a steep enough cut in production, but it is unclear how rapidly this might happen, the International Energy Agency said on Tuesday.

“The word I look at is ‘if’,” Saxo Bank senior manager Ole Hansen said. “OPEC’s compliance (track record) with its own limits is not good.

“What it all adds up to is an increased belief that a firm bottom has been established, but as the market moves higher the risk of self-defeat rises as it opens the door right open for the return of production growth among high-cost producers,” he said.

Igor Sechin, Russia’s most influential oil executive and the head of the Kremlin’s industry champion Rosneft, said his company will not cut or freeze oil production as part of a possible agreement with OPEC.

“Underlying scepticism that global oil producers will succeed in taking coordinated action to support prices is therefore alive and well,” PVM Oil Associates analyst Stephen Brennock said in a note.

“Meanwhile, of those that do see a chance of a genuine output deal, they still need convincing that the proposed cuts will go far enough to address the supply imbalance.”

Goldman Sachs said in a note to clients on Tuesday that despite a production cut becoming a “greater possibility”, markets were unlikely to rebalance in 2017.

“Higher production from Libya, Nigeria and Iraq are reducing the odds of such a deal rebalancing the oil market in 2017,” the U.S. bank said, and added that even if OPEC producers and Russia implemented strict cuts, higher prices would allow U.S. shale drillers to raise output.

Adding to the drag on oil, the dollar rallied to its highest in 11 weeks, lifted by rising expectations that the Federal Reserve could raise U.S. interest rates by the end of the year.

(Additional reporting by Henning Gloystein in Singapore; Editing by Louise Heavens, Greg Mahlich)

Oil jumps after surprise drop in U.S. crude inventories

The Philadelphia Energy Solutions oil refinery owned by The Carlyle Group is seen at sunset in front of the Philadelphia skyline

By Amanda Cooper

LONDON (Reuters) – Oil prices jumped 2 percent on Wednesday after a surprisingly large drop in U.S. crude inventories and as an oil services workers strike in Norway threatened to cut North Sea output.

Brent crude futures were up 91 cents at $46.79 per barrel by 1113 GMT, while West Texas Intermediate (WTI) crude futures rose by 96 cents to $45.01 a barrel.

Oil took its cue from American Petroleum Institute (API) data which showed a 7.5 million barrel drop in U.S. crude inventories to 507.2 million barrels, almost twice the fall expected by analysts.

“Oil’s got its own pretty positive drivers at the moment. The API surprise draw overnight is obviously leading to the question of whether we are going to see the same in the official inventory today,” CMC Markets strategist Jasper Lawler said.

Official storage data is due to be published by the U.S. Energy Information Administration (EIA) later on Wednesday.

Adding to the upward price momentum was an oil service workers strike in Norway that could affect output from western Europe’s biggest crude producing region.

Nevertheless, analysts said any gains could be tempered by caution ahead of the Federal Reserve’s Federal Open Market Committee (FOMC) decision on interest rates later on Wednesday.

Economists do not expect a change in rates but any indication from the Fed on the outlook for economic growth could have an impact on the dollar, and in turn, on oil.

“I don’t expect the Fed to do anything and I don’t expect a ‘hawkish hold’ either. But a bit of dollar weakness should support the backdrop for oil,” CMC’s Lawler said.

“Wednesday has become ‘Big Wednesday’ for oil traders, with not only the FOMC but also the EIA crude inventory numbers out. Should they (EIA) follow the unexpected drawdown like the API and we get no FOMC rate hike, oil bulls may well have reason to be cheering after a tough couple of weeks,” Singapore-based brokerage Oanda said.

Key for the market is next week’s meeting in Algeria between producers from the Organization of the Petroleum Exporting Countries (OPEC) and Russia to discuss measures to rein in oversupply, including an output freeze at current levels, but analysts said they did not expect significant results.

“Even with a freeze – which would still mean OPEC production is at record levels – we will still be in an oversupplied market,” said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.

(Additional reporting by Henning Gloystein and Mark Tay in Singapore; editing by David Clarke)

Oil slips on dollar strength, still set for monthly gain

Traffic passes a BP gas station on the North Circular Road in London,

By Libby George

LONDON (Reuters) – Crude slid on Wednesday, pressured by a strong dollar and high stocks of oil, though prices remained on track for a monthly gain of more than 10 percent.

Brent crude futures were trading at $47.94 per barrel at 1126 GMT, down 43 cents from the previous close, while U.S. West Texas Intermediate crude futures were down 33 cents at $46.02.

Oil had rallied by more than 20 percent from the beginning of August on hopes that producers were reviving talks on a possible output freeze, setting prices on course for their largest monthly gains since April.

Analysts, however, said the focus had shifted to physical market fundamentals, which remained shaky.

“The market is getting tired of those headlines,” Olivier Jakob, managing director of Swiss-based consultant PetroMatrix, said of a potential production freeze.

“Fundamentally, there is not a lot to support oil because the stocks are still at very high levels,” he said.

On Wednesday Saudi Arabian energy minister Khalid al-Falih said that the top crude exporter does not have a specific target figure for its oil production and that its output depends on the needs of its customers.

Yet high oil inventories could limit any quick recovery in prices. U.S. crude stocks rose by 942,000 barrels to 525.2 million barrels in the week to Aug. 26, data from industry group the American Petroleum Institute showed on Tuesday.

Official U.S. oil inventories data from the Energy Information Administration is due on Wednesday.

The strong U.S. currency, which makes dollar-priced commodities more expensive for holders of other currencies, was also affecting oil prices. The dollar index, measured against a basket of six leading currencies, touched 96.143 on Tuesday, its highest since Aug. 9.

The dollar could strengthen further if the U.S. Federal Reserve chooses to increase interest rates this year, as recent comments from Fed Chair Janet Yellen suggested it could.

“I think that many participants underestimate the compounding bearish impact of Fed rate hike amidst weak oil fundamentals,” Harry Tchilinguirian, global head of commodity strategy with BNP Paribas told the Reuters Global Oil Forum. “The only way for this market to prop itself higher is that we have another string of unplanned supply disruptions like we had between February and May this year.”

Still, many analysts still expect a tighter supply and demand balance towards the end of the year and are raising price forecasts accordingly, with Barclays lifting its fourth-quarter forecast by $2 to $52 a barrel.

“The balances are slightly tighter in Q4 than previously assessed,” the bank said.

(Additional reporting by Mark Tay and Henning Gloystein in Singapore; Editing by David Goodman and William Hardy)

Oil falls below $50 on higher supply outlook, economic worries

A view of Mexico's national oil company Pemex's refinery in Salamanca

By Alex Lawler and Dmitry Zhdannikov

LONDON (Reuters) – Oil fell below $50 a barrel on Thursday, pressured by higher Nigerian output and concern about the economic outlook following Britain’s vote to leave the European Union last week.

Returning Nigerian supply will put pressure on prices, Goldman Sachs said, adding that outages caused by Canadian wildfires would virtually end by September.

Norwegian supply could be hit by a threatened workers’ strike, however.

Brent crude <LCOc1> was down 88 cents a barrel at $49.73 as of 1242 GMT, having risen in the two previous sessions. U.S. crude <CLc1> was down $1.02 to $48.86.

“Supply is gradually improving in Canada, although in Norway we still have some risk,” said Olivier Jakob of Petromatrix, who added a weak gasoline refining margin was weighing on crude.

“I don’t think the case is there for $30 oil, but to go to $60 you need to see stronger support from the (refined)products.”

Brent has risen by 85 percent since reaching a 12-year low in January, supported by expectations that a glut that has been weighing on prices since 2014 would start to ease and by unplanned losses from Canada to Nigeria.

“We have a large overhang of surplus stock to work off and that will take some time as well. I’d imagine that over time you will see more upward pressure than downward pressure on prices,” said Royal Dutch Shell’s <RDSa.L> chief executive Ben van Beurden.

Nonetheless, the return of some of that oil and concern over a slowing economy, compounded by Britain’s vote to leave the European Union, are weighing near-term, analysts said.

Adding to economic concerns, industrial output in Asia’s second-largest economy, Japan, slid in May at the fastest rate in three months to its lowest level since June 2013.

On the supply front, oil production in Nigeria has risen to about 1.9 million barrels per day (bpd) from 1.6 million, due to repairs and a lack of new major attacks on pipelines in the Delta region, the state oil company said on Monday.

“Short-term supply conditions look overwhelmingly bearish,” said Georgi Slavov, global head of energy, iron ore and shipping research at Marex Spectron, in a report on Wednesday.

In Norway, oil companies and trade unions began two-day wage talks in a bid to avert a strike that would initially cut the country’s oil and gas output by 6 percent, the Norwegian Oil and Gas Association said.

Oil gained some support from tightening supplies in the United States. U.S. crude stockpiles fell for a sixth consecutive week, the U.S. Energy Information Administration reported on Wednesday.

(This version of the story corrects potential Norwegian output disruption in paragraph 13)

(Additional reporting by Henning Gloystein and Ron Bousso; Editing by Jason Neely and William Hardy)