Rising US output threatens global oil market balance

Rising US output threatens global oil market balance

Rising US output threatens global oil market balance

At the end of November, 24 nations that account for around 60 percent of the world´s oil supply agreed at a meeting in Vienna to keep a lid on output for all of 2018 in order to push up prices.

The Organization of Petroleum Exporting Countries' monthly report raised its outlook for non-OPEC supply in 2018 by 300,000 barrels a day, as its projections for American output caught up with those of the US government.

The Organization of Petroleum Exporting Countries (OPEC) revises the production growth data for non-cartel countries for 2017 and 2018.

The IEA believes total supply growth could exceed demand next year.

"In the first half [of the year], the surplus could be 200,000 barrels before reverting to a deficit of about 200,000 barrels in the second half, leaving 2018 as a whole showing a closely balanced market". The organization - with the support of 10 non-OPEC producers led by Russian Federation - agreed last month to extend their production cuts until the end of 2018.

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But increased production in the United States is driving faster growth in the global supply of oil, the IEA said.

"After the initial surge that understandably accompanies such a major supply disruption, the market has settled down again and, unless another dramatic event occurs in what remains of 2017, it looks as if the Brent crude price will average about $54 (per barrel) for the year, an increase of 20 percent on 2016", the IEA said. However, gasoline stocks were up by 2.3 million barrels, and distillate inventories rose by 1.5 million barrels, compared with expectations for a 902,000-barrel gain, the API data showed. West Texas Intermediate, the US benchmark for the price of oil, was off from the previous session's close by 0.78 percent to $56.16 per barrel.

OPEC predicted that global oil markets won't rebalance until late next year after boosting forecasts for supplies from the USA and other rivals.

Bill O'Grady, chief market strategist at Confluence Investment, summarized the situation succinctly: "You've got a mixed bag of data, frankly", and he added that while USA crude inventories have been declining over the past four weeks, "you are seeing this really impressive build in gasoline".

The U.S. Labor Department, meanwhile, reported first-time claims for unemployment for the week ending December 9 was lower than the previous week by 11,000, though some of last weeks' data were revised higher.

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