USA oil output hampering market rebalancing: OPEC
- Author: Zachary Reyes Jun 16, 2017,
Jun 16, 2017, 12:59
Despite almost six months of Opec-led efforts to reduce a global glut, oil prices have not stabilised at higher levels as many had anticipated when the group agreed with other producers to cut supply back.
In May, OPEC decided along with Russian Federation and other non-members to extend production cuts that began in January until March 2018.
The agency continued to forecast an implied shortfall insupply relative to demand for the second quarter of this year.But it said slowing demand growth in China and Europe inparticular, as well as increasing supply, meant the deficitshould narrow to 500,000 bpd from a prior estimate of 700,000.
The market wasn't caught by surprise by the IEA data, as on Tuesday, the American Petroleum Institute reported that us crude inventories rose 2.8 million barrels last week, while gasoline supplies increased by 1.8 million barrels.
USA crude futures fell by 1% to trade at $45.97 a barrel after the report was released.
OPEC's own compliance with the cuts has been questioned, and the producer group said in a report this week that its output rose by 336,000 bpd in May to 32.14 million bpd.
"Our first look at 2018 suggests that U.S. crude production will grow year-on-year. but such is the dynamism of this extraordinary, very diverse industry it is possible that growth will be faster", the report said.
Crude oil prices continue to get pressured as figures of oil and gasoline stockpiles continues to inflate last week.
The oil research firm noted that the considerable drop in Brent futures prices, soon after the OPEC's meeting in May 25, this year, was mainly caused by an extension of the production cuts, and high level of speculation in the market.
The dollar rose to its highest in more than two weeks, further weighing on oil by making it more expensive for buyers using other currencies.
But those efforts have been blunted by a massive boom in production by US shale operators, who have become much more efficient.
The agency repeated the advice it has given in previous reports, that those hoping for the market to come back into supply-demand balance should expect it to take some time on current policy.