WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange tumbled in afternoon trade Wednesday, with the U.S. crude benchmark falling from a 12-week high after reports emerged Russia is considering easing its production quota under a joint agreement with the Organization of Petroleum Exporting Countries starting July, casting doubt producers would further restrain supplies as demand begins to recover.
Bloomberg reported sources familiar with a meeting between Russia's Energy Minister Alexander Novak and oil majors produced no consensus on extending 9.7 million barrels per day (bpd) in cuts beyond June. Earlier reports indicated Saudi Arabia and Gulf allies were keen to rollover existing curbs into the summer months to expedite a market rebalance. However, Russia never voiced its official position on extending those cuts but instead emphasized the agreement has delivered the desired results. Under terms of the deal, producers were set to lower the total amount of cuts to 7.7 million bpd from June through the end of the year.
Three Russian officials and two industry sources told Bloomberg on Wednesday the country's position is to stick to the original plan of the agreement, citing faster-than-expected recovery in global oil demand.
Novak indicated this week the oil market is still oversupplied by 7 million to 12 million bpd, even as supplies dropped by an estimated 14 million to 15 million bpd, in large part thanks to the global agreement.
Separately, oil traders polled by the Wall Street Journal forecast U.S. crude oil inventories to have declined 1.6 million barrels (bbl) in the week ended May 22, with gasoline supplies are expected to decrease by 300,000 bbl from the previous week. Stocks of distillates, which include heating oil and diesel, are expected to rise by 2 million bbl from the previous week. Refinery use likely rose 1% to 70.4% of capacity.
The Energy Information will release weekly supply estimates at 11:00 a.m. EDT Thursday.
On the session, West Texas Intermediate July futures dropped $1.54 to settle at $32.81 bbl and the International crude benchmark Brent July contract dropped back $1.43 to $34.74 bbl, expanding discount to next-month delivery August contract to $0.71 bbl ahead of expiration on Friday. NYMEX June ULSD futures finished 1.87 cents lower at $0.9721 gallon, with the next-month delivery July contract widening its premium to 3.78 cents. NYMEX June RBOB futures settled down 5.56 cents at $0.9933 a gallon and next-month delivery finished at a 2.44 cents premium.
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