Global oil output sees slowest growth since 2013

Crude oil benchmarks registered steep declines on Wednesday (14 June), on bearish United States inventory data and a warning from the International Energy Agency (IEA) that the global oil glut was set to continue despite Opec's effort to cut production. Riyadh is leading an effort by the Organization of the Petroleum Exporting Countries, Russia and other oil producers to cut output by nearly 1.8 million bpd until March 2018 to curb oversupply.

The Paris-based IEA said production outside the Organisation of the Petroleum Exporting Countries (Opec) would grow twice as quickly in 2018 as it will do this year, when Opec and 11 partner nations have restrained output.

Last month, OPEC and top nonproducers chose to extend their production cut to remove 1.8 million barrels per day from the market until March 2018 in an effort to push stockpiles below the five-year average.

Rather, it was the International Energy Agency's (IEA) new report that suggests that American oil supplies are going to exacerbate the problem producers are contending with in the market today: the global glut of crude.

Both crude benchmarks have lost all the gains made at the end of previous year after the Organization of the Petroleum Exporting Countries agreed with other big producers to cut output in an effort to prop up prices.

The spot price of benchmark West Texas Intermediate (WTI) crude oil was $46.10 per barrel as of June 12, according to the U.S. Energy Information Administration (EIA).

Brent crude touched a low of $46.70 a barrel on Thursday, weakest since May 5 and just above six-month lows, before recovering.

"Patience is required on the part of those looking for the rebalancing of the oil market, and new data leads us to repeat the message", the IEA said.

"Oil prices plunged further to five-month lows amid record trading volumes, as major oil producers ruled out deeper production adjustments".

Saudi Arabia, which has voluntarily cut production below its OPEC target, told OPEC it lowered output further by about 66,000 bpd in May to 9.88 million bpd. Prices dropped $1.73 to $44.73 on Wednesday, the lowest close since November 14.

But a monthly oil market report issued Tuesday by OPEC revealed that Nigeria and Libya - two members exempted from the cuts - had ramped up production, leading to a significant increase in the cartel's overall May output.

But this increase in demand is set to be outpaced by growth in supply.

"Production growth in Libya and Nigeria and continued rig additions in the US are complicating the picture, raising doubts on OPEC's strategy", AB Bernstein said.

Meanwhile, stockpiles of oil products increased, with gasoline inventories rising by 2.1 million barrels and distillates building by 300,000 barrels last week.

  • Zachary Reyes