U.S. oil output hampering market rebalancing: OPEC
- Author: Zachary Reyes Jun 16, 2017,
Jun 16, 2017, 11:58
OPEC's plan to cut production and support prices is likely to be undone by increased output in the USA, the International Energy Agency predicted Wednesday.
OPEC said oil inventories in industrialized countries dropped in April and would fall further in the rest of the year, but a recovery in USA production was slowing efforts to get rid of excess supply.
Pressure from US oil production and some OPEC members mean market balancing is stalled, the International Energy Agency reported Thursday.
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.
Last month, Iran exported about 1.1 million bpd to Europe including Turkey, nearly reaching pre-sanction levels and only slightly below the 1.2 million bpd supplied to Asia, the source said.
Oil prices edged down on Tuesday after OPEC reported an increase in its production for May despite a supply cut agreement and said the oil market was rebalancing more slowly than expected.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $45.96 per barrel, down 50 cents, or 1.1 percent. US crude futures CLc1, meanwhile, were down 3.4 percent to $44.92 a barrel, the lowest intraday level since May 5.
"Inventory data out last night showed another weekly build in crude inventories despite markets expecting a draw", he said.
However, oil stocks are near record highs in many regions across the world as traders anticipate further fall in prices. But adherence to the cuts is under scrutiny and the producer group said this week its output rose by 336,000 bpd in May to 32.14 million bpd.
Due to projections of lower oil productions, the EIA reports that the responsiveness of the United States to global oil production may ultimately mean a greater supply in the country for 2018. Plummeting oil prices would be an economic negative for oil producing nations, according to other analysts cited by CNBC. OPEC also revised down its forecast for non-OPEC oil supply growth this year by 110,000 bpd to 58.14 million bpd.
The U.S. oil boom will keep piling on the pain for OPEC well into next year. The global benchmark crude traded at a premium of $2.14 to August WTI. On May 25, the countries said they agreed to extend the cuts nine months through next March.
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.