Published: Thu, June 15, 2017
Markets | By Erika Turner

IEA sees rising oil production, weaker demand into 2018

IEA sees rising oil production, weaker demand into 2018

Crude oil prices were under strain again in early Wednesday trading after the International Energy Agency reported headwinds for a balanced market.

The benchmarks, Brent crude oil LCOc1 was down by 45 cents a barrel and US crude CLc1 by 50 cents at $45.96.

While Iraq is among OPEC nations that pledged to restrict production to eliminate a global glut, there are signs that it may nonetheless be gaining a share of key import markets. It predicts that output will grow even faster next year, by 1.5 million barrels daily, "which is slightly more than the expected increase in global demand".

The EIA's reported decline in crude supplies was "a welcomed sight after [Tuesday's] API report, but today's report on the whole was still quite bearish", said Troy Vincent, oil analyst at ClipperData.

The upward movement on gasoline inventories for another week was also a huge disappointment, climbing 1.794 million barrels this week, compared to an expected draw of 1.15 million barrels.

"'Whatever it takes" might be the mantra, but the current form of "whatever' is not having as quick an impact as expected", the IEA said.

Crude oil prices were down more than 1 percent in overnight trading, but moderated ahead of the start of trading in NY.

"This is very unusual for this time of the year, when gasoline demand is supposed to pick up", said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany.

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Overnight, crude futures settle higher on Tuesday as investors looked ahead to fresh USA crude inventory data expected to show draw in crude stockpiles, offsetting concerns about an uptick in output from OPEC members.

If OPEC stands pat, putting hope over past experience, then the price of crude (which is down 13 percent since late May) could drop further, perhaps much further.

Adding to the supply surplus is rising USA production from shale drillers that has pushed US output up by 10 percent over the past year to 9.3 million bpd, not far below levels by top exporter Saudi Arabia.

July gasoline RBN7, -4.11% was down 4.2% at $1.437 a gallon on the New York Mercantile Exchange, while July West Texas Intermediate crude CLN7, -3.64% lost 3.8% to $44.70 a barrel. Prices have averaged higher so far this year, at around $51.8 a barrel.

For oil traders, hedging data serves as a leading indicator of future supplies.

The measures helped stabilise oil prices at the beginning of the year, with the worldwide benchmark Brent crude sticking above US$50 per barrel.

"World oil demand averaged 95.12 mb/d in 2016, up by 1.5 per cent year-on-year (y-o-y), with the largest increases in the Asia Pacific region, particularly China and India, as well as Western Europe, North America and Africa".

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