Oil in Global Economy Series: OPEC May deal compliance review

Jun 18, 2017, 01:27
Oil in Global Economy Series: OPEC May deal compliance review

The market wasn't caught by surprise by the IEA data, as on Tuesday, the American Petroleum Institute reported that us crude inventories rose 2.8 million barrels last week, while gasoline supplies increased by 1.8 million barrels.

United States inventories fell less than forecast last week, keeping supplies more than 100 million barrels above the five-year average, according to data from the Energy Information Administration on Wednesday. It reported that USA crude oil inventories fell by 1.7 MMbbls (million barrels) to 511.5 MMbbls on June 2-9, 2017.

That compares with analysts estimates in a Reuters poll for a 0.5 million barrel draw in gasoline stocks and a 2.7 million barrel draw in crude inventories.

The U.S. West Texas Intermediate crude July contract was at $44.48 a barrel by 3:55AM ET (0755GMT), down 25 cents, or around 0.6%.

Oil prices edged up from 2017 lows on Friday but an ongoing supply excess put them on track for their fourth consecutive week of losses despite OPEC-led production cuts to support the crude market.

Oil prices are rallying after trading around seven-month lows overnight amid concerns the Organisation of the Petroleum Exporting Countries' (Opec) output cuts are not doing enough to curb the global oversupply. The Standard & Poors Energy Sector Index showed a 2.1 drop, overall, with shares of Exxon Mobil falling by 1.4 percent, to hit $81.83; Chevron also fell by almost 2 percent, to hit $106.18.

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It's the shipping, stupid: why Opec's output cuts are not working
Importantly, the IEA expected the increase in non-OPEC supply next year to be higher than the growth in overall global demand. This upward adjustment was mainly due to the downward revision in non-OPEC supply as world oil demand remained unchanged.

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Global oil output will expand faster than worldwide demand for oil next year, primarily as USA producers rack up production, and that could hamper exporters' efforts to prop up prices, the IEA said Wednesday.

The EIA reports that the price of oil over the course of quarter three may lead to possible increases in price over the next few months of this year.

It did not provide a forecast for Opec output next year, but calculated that it rose to 32.08 million bpd in May, taking the overall global supply to 96.69 million bpd last month.

Kazakhstan, which agreed to cut supplies previous year as part of the non-OPEC bloc, said it would reduce production in June and July after overproducing for three months in a row.

"Oil has been weighed down by the market's impatience with the generally slow pace of the global inventory drawdown amid a significant recovery in global oil supplies, particularly from the US", OPEC said in its June report today.

That means an entrenched market glut that has kept a firm lid on oil prices is likely to persist, despite disciplined efforts by most OPEC producers to rein in their own output.

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