Published: Thu, June 15, 2017
Economy | By Guillermo Lane

US oil output hampering market: OPEC

US oil output hampering market: OPEC

The IEA also forecast USA crude supply to grow by 430,000 bpd in 2017, and by 780,000 bpd in 2018, with many forecasting United States production to cap 10m bpd next year. Early indications suggest that remains the case this month, one of the sources said.

IEA expects total non-OPEC production to increase by.7 mb/d in 2017, and to grow by 1.5 million b/d in 2018, slightly more than the forecast increase in global demand.

The Saudis may well look at that figure and think that they should have supplied that crude to China, but they haven't in the name of rebalancing the market.

It said it "makes sobering reading for those producers looking to restrain supply". Oil prices pared gains on June 13 after the release of the report to trade towards $48/bbl, below the $60 level that top OPEC producer Saudi Arabia would like to see and less than half the level of mid-2014.

USA oil imports from Saudi Arabia were above 1 million bpd from May-August previous year, according to US government data.

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. Prices have averaged higher so far this year, at around $51.8 a barrel.

First, a little good news came to the market this week as the EIA reported a 1.7-million-barrel draw in inventories.

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July West Texas Intermediate crude fell $1.55, or 3.3%, to $44.91 a barrel on the New York Mercantile Exchange.

Nonetheless, the increase in output and exports via tanker show the scale of the challenge facing OPEC, and its de facto leader Saudi Arabia, the world's biggest crude exporter.

Iraq is driving up crude oil exports to the US, the world's second-biggest import market, just as there are signs Saudi Arabia is honoring a pledge to restrict such deliveries, according to tanker-tracking data. The American Petroleum Institute signaled US inventories probably climbed a second week, ahead of data from the EIA forecast to show a decline.

In addition, Opec's monthly report showed output from the group rose by 336,000 bpd in May to 32.14 million bpd, led by a recovery in Nigeria and Libya which are exempt from supply cuts.

Oil inventories in developed nations remain higher than before OPEC started cutting production.

"The industry continues to turn a crude oil surplus into a gasoline and distillate product surplus", Andrew Lipow, president of Lipow Oil Associates in Houston said.

Cash-strapped US shale firms scaled back their hedging programs in the first quarter, leaving them more vulnerable to tumbling spot market prices just after OPEC reached a landmark deal to curb global supply.

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