Published: Sun, June 18, 2017
World News | By Carolyn Briggs

Oil falls to seven-month low on high inventories

Non-OPEC member countries are expected to boost their combined oil supplies by 1.5 million barrels a day next year, which by itself can satisfy the expected global demand growth of 1.4 million barrels a day, CNBC reported citing a report from the International Energy Agency. US inventories fell less than forecast last week, keeping supplies more than 100 million barrels above the five-year average, according to data from the Energy Information Administration on Wednesday. US crude was $1.52, or 3.3 percent, lower at $44.94.

U.S. West Texas Intermediate (WTI) crude futures were down 14 cents at $44.58 per barrel.

Additionally, the EIA reports that the largest global increase for crude oil will occur in quarter two of 2018, due to OPEC and Brazilian-driven production are on the rise.

As such, OPEC said, in its monthly report, "Although oil prices rebounded from five-month lows in (mid-May), following positive U.S. jobs data and assurances by Saudi Arabia that Russian Federation is ready to join OPEC in extending production adjustments to reduce a persistent supply glut".

Oil inventories are near record highs in some parts of the world, and producers outside the Opec deal are increasing output. Both benchmarks notched a weekly loss exceeding 1.6 percent. Despite "robust demand", Fesharaki told CNBC that "there is too much oil on the market".

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Top producer Russian Federation, not an OPEC member but which signed up to the deal to cut output, is expected to export 61.2 million tonnes of oil via pipelines in the third quarter, equivalent to about 5 million bpd, against 60.5 million tonnes in the second quarter, according to industry sources and Reuters calculations.

"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.

A rapid rise in United States shale oil output will contribute to the increase in non-Opec supply next year, the IEA said.

The recovery in the price of oil from last year's lows has, however, made it profitable once again for USA shale oil companies to ramp up production.

The US Government's Energy Information Administration has forecasted domestic output growth to 460,000bpd this year revising the earlier prediction of a decline of 80,000bpd in December.

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