The IEA Thinks the Oil Glut Problem Is Getting Worse

Oil prices fell on Wednesday after industry data showed a build in US crude stocks and OPEC reported a rise in its production despite a pledge to cut output.

"OPEC should rethink its strategy of trying to verbally and artificially drive oil prices higher, because the result of that strategy is very resilient USA production".

The International Energy Agency is forecasting US output to grow by 620,000 bpd in 2017, compared with a prediction that production would be flat in its November assessment.

Oil slumped to the lowest close in seven months this week as concerns grew that rising U.S. supplies will offset the production curbs by the Organization of Petroleum Exporting Countries and allies including Russian Federation.

Both the benchmarks, the Brent crude futures and U.S. West Texas Intermediate (WTI) crude futures were at were up 42 cents at $47.34 per barrel and $44.74 per barrel, up 28 cents, respectively. The EIA expects that to rise above 10 million bpd in 2018. Yet crude prices have slid about 12 percent since that day as other countries have boosted output.

"Chinese demand is we have a build-up of crude in Asia where demand seems to have slowed for now", said Oystein Berentsen, managing director of oil trading company Strong Petroleum.

Oil inventories have remained high several months into a deal by OPEC producers with non-member nations to reduce supply by 1.8 million bpd.

The agreement to curb output by 1.8 million barrels per day (bpd) has been prolonged through March 2018.

The Energy Information Administration said Wednesday that gasoline inventories, one of the products that crude is refined into, unexpectedly rose by roughly 2m barrels against expectations for a decline of 457,000 barrels.

But production in the United States, which is not part of the deal, has jumped 10 percent over the past year to 9.33 million bpd.

"Libya and Nigeria have brought more oil online and that's really hindering" OPEC's efforts, said Tariq Zahir, crude trader and managing member at Tyche Capital Advisors in NY.

Global oil output will expand faster than worldwide demand for oil next year, primarily as USA producers rack up production, and that could hamper exporters' efforts to prop up prices, the IEA said Wednesday.

  • Zachary Reyes