United States oil output hampering market rebalancing: OPEC

Growth in oil supply next year is expected to outpace an anticipated pick-up in demand that will push global consumption above 100 million barrels per day (bpd) for the first time, the International Energy Agency (IEA) said on Wednesday.

Brent Crude was down 0.37 percent at US$46.01, compared to US$48.32 at opening.

Brent crude oil fell by 28 cents to $48.44 a barrel\, while US crude futures were down 29 cents on the day at $46.17.

While financial traders have confidence in rising prices, the physical market remains under pressure, especially due to a rise in US drilling for new oil production. Oil prices pared gains on June 13 after the release of the report to trade towards $48/bbl, below the $60 level that top OPEC producer Saudi Arabia would like to see and less than half the level of mid-2014.

The American Petroleum Institute reported crude inventories rose 2.8 million barrels last week while gasoline supplies increased by 1.8 million.

The U.S. oil boom will keep piling on the pain for OPEC well into next year.

The oversupply is particularly acute in the so-called Atlantic basin, where high quality light, sweet crude is abundant thanks to the return of some Nigerian production after a disruption of more than a year, stronger output from Libya, robust North Sea supplies and record-high US oil exports.

Soaring U.S. output undermines OPEC-led efforts to cut nearly 1.8 million bpd of production until the first quarter of 2018 in order to prop up prices.

The U.S. Energy Information Administration report on oil inventories is due this week on Wednesday at 10:30 a.m. EDT.

"The rebalancing of the market is under way, but at a slower pace, given the changes in fundamentals since December, especially the shift in USA supply from an expected contraction to positive growth", OPEC added. Indian Oil Corp., the nation's biggest processor, will boost Iraqi imports to about 18 million tons in 2017 under term contracts from 15.6 million previous year, said Finance Director Arun Kumar Sharma.

Last month Opec extended a six-month agreement to curb production by a further nine months to attempt to bring inventories down to nearer average levels and support oil prices.

More specifically for oil, there are signs of a slowdown in China, long the key component of fuel demand growth, as its economy slows.

  • Zachary Reyes