Oil market could tip out of balance on rising non-Opec production

Tammy Harvey
November 16, 2017

Finally, the WEO-2017 introduces a major new scenario - the Sustainable Development Scenario - that outlines an integrated approach to achieving internationally agreed objectives on climate change, air quality and universal access to modern energy.

Brent for January settlement dropped 83 cents to $61.38 a barrel on the London-based ICE Futures Europe exchange.

U.S. West Texas Intermediate (WTI) crude CLc1 settled down 37 cents to $55.33 a barrel.

Just last week, prices for both crude benchmarks hit their highest levels since 2015.

Oil prices fell for a third day in a row on Tuesday on forecasts for rising USA crude output and a gloomier outlook for global demand growth in a report from the International Energy Agency (IEA).

The International Energy Agency (IEA) on Tuesday cut its oil demand growth forecast by 100,000 barrels per day (bpd) for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018.

"Using a scenario whereby current levels of OPEC production are maintained, the oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 600,000 bpd followed by another, smaller, surplus of 200,000 bpd in 2Q18", the agency said.

The IEA, which tracks the energy for 29 countries, said the U.S. - once reliant on imports - is becoming the "undisputed global oil and gas leader".

This sentiment comes in part on the back of rising US oil output, which has grown by more than 14 percent since mid-2016 to a record 9.62 million bpd.

The IEA also today released its latest World Energy Outlook, in which it said global oil demand will fall modestly due to the rise in electric cars.

USA oil production has already increased by more than 14% since mid-2016 to 9.62-million barrels a day and is expected to grow further.

United States oil and gas output is projected to surpass that of any other country in history, due to "a remarkable ability to unlock new resources cost-effectively".

In May, Opec producers agreed to extend production cuts for a period of nine months until March, but stuck to production cuts of 1.2 million bpd agreed in November a year ago.

Prices also remained under pressure from this week's International Energy Agency (IEA) outlook for slower growth in global crude demand.

Opec has yet to show it has convinced Russian Federation, one of its partners in the deal, that a decision to prolong output cuts is needed when the group meets in Vienna later this month.

"The past year has been an historic one for Opec and the global oil industry", Barkindo said.

Other reports by Ligue1talk

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