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Oil steady as US resumes Gulf of Mexico output amid signs of further supply
[TOKYO] Oil prices were steady on Tuesday after falling in the previous session as output in the US. Gulf of Mexico resumed after Hurricane Barry swept through over the weekend and as US shale production is expected to rise to a record.
Brent crude futures were up 7 cents, or 0.1 per cent, at US$66.55 a barrel by 0426 GM after dropping earlier in the session. They fell 0.4 per cent overnight.
US West Texas Intermediate crude futures rose by 1 cent to US$59.59 a barrel after falling earlier in the session. The US benchmark fell about 1 per cent in the previous session.
Producers on Monday began restoring some of the roughly three-quarters of output that was shut at US Gulf of Mexico platforms ahead of Hurricane Barry.
"The previous storm expectations didn't pan out, which is good, but you have still got platforms with about 69 per cent of output off," said Phin Ziebell, senior economist at National Australia Bank.
"It was a bit of a shock to supply but a short term one. The market has returned to a bit of normality," he said.
There was 1.3 million barrels per day (bpd) of oil production offline in the US waters of the Gulf of Mexico on Monday, about 80,000 barrels fewer than on Sunday.
Workers also were returning to the more than 280 production platforms that had been evacuated. It can take several days for full production to be resumed after a storm leaves the Gulf of Mexico.
The market was also weighed down by signs of further increases in output from the United States, which has ridden a wave of shale oil production to rise to become the world's biggest crude oil producer, ahead of traditional top producers Russia and Saudi Arabia.
US oil output from seven major shale formations is expected to rise by about 49,000 bpd in August, to a record 8.55 million bpd, the US Energy Information Administration said in its monthly drilling productivity report.
Overall US crude production is now more than 12 million bpd.
The rising US output will further undermine the efforts by Russia and Saudi Arabia to reduce global oil inventories by convincing suppliers both in the Organization of the Petroleum Exporting Countries and outside of Opec to cut production.
The global supplier group, known as Opec+, agreed earlier this month to extend their production cuts for another nine months.
"On the one hand you have the Opec output cuts and there's some geopolitical issues around Iran. But the demand outlook is muted and US supply is perennially good from shale oil, which seems to have structurally changed the nature of the oil market," said Mr Ziebell.