US oil production seen thwarting OPEC effort to boost prices

Lucy Hill
June 15, 2017

In May, the Organization of the Petroleum Exporting Countries (OPEC) crude production increased by 290,000 barrels per day 32.08 million barrels, the highest so far this year.

The price of a barrel of oil fell further to $47.12 on Wednesday after new data from the American Petroleum Institute showed usa crude stocks had risen 2.8m barrels in the week to 9 June.

The market peaked at $55 a barrel in January as cuts got under way, but has struggled since, and closed Monday at $48.29 a barrel, barely changed from the end of November, when OPEC agreed with nonmembers to cut 1.8 million barrels a day in supply.

"It's like the IEA report said, some members have been less than wholly diligent", Giovanni Staunovo, a Zurich-based commodity analyst at UBS Group AG, said of Iraq's early June shipments. "OPEC should rethink its strategy of trying to verbally and artificially drive oil prices higher, because the result of that strategy is very resilient US production". New supplies from OPEC's competitors will be more than enough to meet growth in demand next year, the IEA said in a report Wednesday.

In its first forecast for 2018, the International Energy Agency said Wednesday it expected countries outside the cartel to increase production by about 1.5 million barrels per day, outstripping the growth in global demand.

Benchmark Brent crude was 28 cents higher at US$48.57 a barrel as of 1.53pm EDT (1753 GMT), while United States light crude was up 21 cents to US$46.29 a barrel.

Parties to an agreement led by the Organization of Petroleum Exporting Countries to balance the market through managed production declines chose to extend the arrangement by three months into early 2018.

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It is the sort of situation that is unlikely to persist, with the Saudis likely to demand more compliance from Opec and the 11 allied producers, including Russian Federation.

Oil stocks are near record highs in some parts of the world, and producers that are not part of the OPEC deal are increasing output.

The renewal comes at a time when the global supply overhang has been depressing the oil prices and revenues for over the past three years. Accordingly, higher shale oil supplies will weigh on prices.

According to IEA's June market report, total OECD oil stocks in April grew by more than the seasonal norm, and have risen so far this year by 350,000 bpd.

The IEA has revised its forecast upwards for U.S. oil production this year, and said Brazil and Canada were also expected "to make further gains".

The surge in oil production also stems from some OPEC members failing to meet production targets.

Other reports by TheDailyFarc

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