Oil falls as USA stockpiles rise and IEA sees 2018 supply surge
15 June, 2017, 01:34 | Author: Celia Hoffman
The Organization of the Petroleum Exporting Countries prefers to talk about output when assessing the impact of the deal among members and 11 allied countries to reduce production by 1.8 million barrels per day (bpd). IEA said its provisional monthly data for May indicates that OECD stocks may be little changed.
If OPEC stands pat, putting hope over past experience, then the price of crude (which is down 13 percent since late May) could drop further, perhaps much further.
"Our first outlook for 2018 makes sobering reading for those producers looking to restrain supply", said the Paris-based IEA, which advises most of the world's major economies on energy policy.
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 barrels per day in May to 32.14 million barrels per day. So far in June, Saudi exports to the United States were below 1 million bpd, according to shipping data and industry sources. The IEA said stocks were 292 million barrels above the five-year average. Yet the group lowered expectations for non-member Russian Federation, which has been cooperating with Saudi Arabia on production, by 200,000 bpd, or about two-thirds of the original estimate. West Texas Intermediate crude futures, meanwhile, were down 3.4% to $44.92/bbl, the lowest intraday level since May 5.
"Demand for gasoline is weaker than one would expect given that the national average [price] is lower than a year ago", Patrick DeHaan, senior petroleum analyst at GasBuddy, told MarketWatch. The moves come as the inventory report, released Wednesday at 10:30 a.m.
The measures helped stabilise oil prices at the beginning of the year, with the Global benchmark Brent crude sticking above US$50 per barrel.
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.
The widely expected quarter-point interest rate hike after the current Fed meeting wraps up later on Wednesday will take the Fed funds target rate above 1 percent for the first time since the immediate aftermath of the collapse of Lehman Brothers in 2008.
The declines followed data from OPEC Tuesday which indicated that member states increased production last month, despite reaching an agreement to trim output.
While Iraq is among OPEC nations that pledged to restrict production to eliminate a global glut, there are signs that it may nonetheless be gaining a share of key import markets.
Incorporating the scenario that OPEC countries continue to comply with their output agreement, [worldwide] stocks might not fall to the desired level until close to the expiry of the agreement in March 2018.
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