Oil prices struggle on doubts OPEC can rein in oversupply

18 June, 2017, 01:23 | Author: Ora Austin

Non-OPEC member countries are expected to boost their combined oil supplies by 1.5 million barrels a day next year, which by itself can satisfy the expected global demand growth of 1.4 million barrels a day, CNBC reported citing a report from the International Energy Agency.

Oil prices plunged almost 4% on Wednesday after the U.S. Energy Information Administration said that crude oil inventories fell by 1.7 million barrels in the week ended June 9, disappointing expectations for a decline of around 2.8 million barrels.

In the US, which is not participating in any deal to reduce production, oil output has risen more than 10 percent in the past year to 9.3 million bpd.

It is important to note that gasoline stockpiles rose by a surprising 2.1 million barrels (considering the decline), compared to an expectation of 457,000 gallon drawdown as, it seems, Americans are spending more time traveling to vacations within North America.

As of mid-morning Wednesday, U.S. Brent crude was down $1.53 a barrel, or 3.1%, at $47.19.

In the United States, which is not participating in any deal to hold back production, oil output has risen over 10 per cent over the past year to 9.3 million bpd, and the Energy Information Administration (EIA) expects that figure to rise above 10 million bpd in 2018.

While a "rebalancing of the market" was "underway", it was "at a slower pace than originally anticipated", the Organization of Petroleum Exporting Countries wrote in its latest monthly oil market report. "The market remained in technically oversold territory with futures trading down as much as 19% from highs in mid-April".

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Kazakhstan, which agreed to cut supplies past year as part of the non-OPEC bloc, said it would reduce production in June and July after overproducing for three months in a row.

Oil inventories are near record highs in some parts of the world, and producers outside the Opec deal are increasing output.

OPEC cut its estimate of oil supply growth from producers outside the group this year to 840,000 bpd from 950,000 bpd, following the decision to extend the curbs.

The Organisation of the Petroleum Exporting Countries agreed to extend that deal that began in January through March 2018, but ongoing growth in USA production, along with exemptions for non-members Nigeria and Libya, have offset those cuts to some extent.

The EIA reports that the price of oil over the course of quarter three may lead to possible increases in price over the next few months of this year.

Crude prices came under pressure Wednesday after official data showed global oil stocks had increased, despite attempts by major producers to rebalance the market.

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