dglobalnews.com Crude Oil Production Soared in June: IEA
Published: Fri, July 14, 2017
Research | By Kayla Price

Crude Oil Production Soared in June: IEA

Crude Oil Production Soared in June: IEA

Prices drifted lower during Thursday's Asian session with buyers unable to make any impression.

XAutoplay: On | OffOPEC compliance fell to 78%, the lowest rate this year, after reaching a peak of over 90% earlier this year, as production increased in Saudi Arabia, according to a report from the International Energy Agency.

There was more encouraging evidence surrounding oil demand.

The IEA's global supply and demand estimates suggest oil stockpiles should have declined at a rate of 700,000 bpd in the second quarter, but it's uncertain whether that actually happened, the agency said.

OPEC also estimated a 1.14 million bpd increase from all non-OPEC producers next year, a significant raise from growth of 800,000 bpd this year led by the US. Since oil is priced in US dollars, cheaper crude could for instance be partially offset by a devalued domestic currency - as was the case with Russian Federation and the ruble.

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West Texas Intermediate (WTI) crude futures were down 3 cents at $45.46 per barrel.

Supply issues will tend to remain the dominant short-term focus with more positive rhetoric from OPEC needed to revive confidence, although choppy trading conditions are liable to continue. However, lasting price movements could be limited over the next year because some US tight oil producers have used financial instruments to guarantee a price above $50/b for their expected production. US oil production has been strong relatively speaking, though lower oil prices in June led to brief declines in output, as well as exploration and production activity.

The EIA also lowered its outlook for US oil production that might become more severe as shale procures are losing millions and can't find the money to complete rigs, and that means there could be another round of shale bankruptcies in the making.

Libya and Nigeria, which were spared from supply cuts because they are recovering from conflict, also opened the taps.

Not only has Libya's oil production rebounded, but it also appears that these gains are not temporary. The U.S. Energy Information Administration on Tuesday lowered its production forecast for 2018 to 9.9 million barrels a day, slightly down from around 10 million before. If Libya and Nigeria do not experience any more disruptions due to violence or political instability, it is very likely that these countries will have no choice but to comply with the production cut. In both years, most of this growth (about 1.2 million b/d annually) comes from countries outside of the Organization for Economic Cooperation and Development (OECD), with China and India expected to be the largest contributors to non-OECD liquid fuels consumption growth.

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