Oil output set to outpace demand in 2018: IEA

Oil surges

BP PLC (BP.LN) (BP.LN) said its latest research report that global crude-oil production in 2016 (http://www.marketwatch.com/story/global-oil-output-in-2016-logged-slowest-growth-in-7-years-2017-06-13) saw its slowest percentage growth in seven years, as output from producers outside of OPEC marked its biggest drop in almost 25 years.

And they have racked up production as prices rise.

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. Crude oil futures have lost 15 percent of their value since February, raising the risk that unhedged companies are more exposed to market weakness.

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.

The IEA's baseline for determining when oil stocks can be considered as having rebalanced is when they return to their five-year average, or 292 million barrels below where they are today. The credit must go to Saudi Arabia and Russian Federation for their strong leadership in ensuring the rest of OPEC adopted the proposal they first jointly made over three weeks ago.

The upward movement on gasoline inventories for another week was also a huge disappointment, climbing 1.794 million barrels this week, compared to an expected draw of 1.15 million barrels.

This reduction in exports is close to the 500,000 barrels a day output cut pledged by the Saudis in terms of the November agreement, which in May was extended to March 2018.




USA crude fell 3.57 percent to $44.80 per barrel and Brent was last at $47.01, down 3.51 percent on the day. "There is too much oil from the US, too much oil from Libya, too much oil from Nigeria", said Fereidun Fesharaki, founder and chairman of consulting group FGE, which focuses on oil and gas markets east of the Suez and in Europe and the U.S, reports CNBC. Iraq also passed Saudi Arabia as the number one supplier to India, the fastest growing oil consumer.

Last year, Saudi Arabia burnt 700,000 bpd of crude to generate power in the peak summer months.

The EIA's reported decline in crude supplies was "a welcomed sight after [Tuesday's] API report, but today's report on the whole was still quite bearish", said Troy Vincent, oil analyst at ClipperData.

After basing the legitimacy of its initial crude cutback initiative, and more recently its extension, on the argument that it was resulting in an imminent market rebalance, the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday admitted that the recovery is now underway at a "slower pace" - and that the cartel's output in May increased due to Nigeria and Libya being exempt from the deal.

"The revisions to non-OPEC supply growth have been much greater than the upward adjustments to world oil demand growth, accentuating the imbalance in the market", it said.

"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.

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