Oil prices struggle on doubts OPEC can rein in oversupply

Oil prices struggle on doubts OPEC can rein in oversupply

Oil prices struggle on doubts OPEC can rein in oversupply

"OPEC 2017 year-to-date exports are only down by 0.3 million barrels per day (bpd) from the October 2016 baseline", analysts at AB Bernstein wrote.

As such, OPEC said, in its monthly report, "Although oil prices rebounded from five-month lows in (mid-May), following positive USA jobs data and assurances by Saudi Arabia that Russian Federation is ready to join OPEC in extending production adjustments to reduce a persistent supply glut".

The upshot of all of this is as obvious as it will be disheartening to petrostates: the oil market will swing further into oversupply next year.

Oil prices edged lower in European trading on Thursday, as data showing U.S crude stockpiles shrank by less than anticipated, while gasoline inventories increased, underlined fears over a global supply glut. Prices slid $1.72, or 3.5 percent, to $47 on Wednesday.

Global benchmark Brent crude rose 0.83 per cent to trade at $47.31 a barrel while the price of the U.S. benchmark, West Texas Intermediate (WTI), was 0.63 per cent higher at $44.74 a barrel. Production across OPEC rose by about 336,100 barrels per day to 32.1 million bpd, according to secondary sources, led by increases from Libya and Nigeria, which are exempt from the deal, and Iraq, CNBC reported. Brent traded at a premium of $2.35 to August WTI.

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Due to projections of lower oil productions, the EIA reports that the responsiveness of the United States to global oil production may ultimately mean a greater supply in the country for 2018.

USA investment bank Jefferies said the low prices were due to "a relentless build in the US rig count, weekly builds in USA inventories, rising production in Nigeria and Libya, and weak compliance by key OPEC members Iraq and the UAE". Market watchers had anticipated deeper cuts, which along with rising US shale oil production, helped push crude oil prices below $50 per barrel.

Add in Russia's tanker shipments and its total exports are likely to be more than 9 million bpd.

The International Energy Agency is forecasting USA output to grow by 620,000 bpd in 2017, compared with a prediction that production would be flat in its November assessment.

OPEC now expects USA production to increase by 800,000 bpd in 2017. New production from OPEC rivals will be more than enough to meet demand growth next year, the International Energy Agency said Wednesday in its first forecast for 2018. Production rose by 12,000 barrels a day to 9.33 million barrels a day.

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