Published: Thu, July 13, 2017
Markets | By Erika Turner

OPEC sees lower demand for its oil in 2018, points to surplus

OPEC sees lower demand for its oil in 2018, points to surplus

Oil prices have slumped into a bear market on concern that production cuts implemented by OPEC and Russian Federation since the start of the year aren't deep enough to clear a global glut, while USA shale-oil producers are gearing up to fill in any shortfall.

The EIA said that US crude production will average 9.9 million barrels a day, down from a previous forecast of 10.1 million barrels a day in what I predict will be the first of more production downgrades in the future.

OPEC's oil production rose again in June, driven by increases in Libya and Nigeria, and as top exporter Saudi Arabia reported pumping more than it agreed to past year.

OPEC blamed its production increase in June to increased internal demand, and studies show that OPEC's internal demand has increased across the board, more than tripling since 1980 as a result of population increases and growing economic stability within many of OPEC's countries.

WTI Crude oil prices posted sixth weekly loss in the past seven weeks amid concerns over supply glut, which is neutralising the impact of OPEC's output cut extension and strong global demand.

USA production is expected to increase in 2018, albeit at a lower rate than previously estimated.

USA heating oil futures were also up nearly 2 percent at midday.

All this is setting the stage for on-highway diesel projected to average $2.59 per gallon for this year, down 2.5% from last month's forecast, but 12.1% higher when compared to 2016's average.

Brent crude futures rose 22 cents, or 0.5 percent, to settle at $47.74 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 45 cents, or 1 percent, to settle at $45.49.

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American Petroleum Institute (API) said that inventories fell by 8.1 million barrels, to 495 million barrels.

It may be time for OPEC and USA shale producers to pump the brakes.

In June 2015, USA oil production hit its then-highest on the record at 9.61 mln bpd, but the volumes of United States oil output have exceeded that number by now.

U.S. gasoline futures rose 1.2% and closed at $1.51 per gallon on July 11, 2017.

The U.S. Energy Information Administration report on oil inventories is due ton Wednesday at 10:00 a.m. EDT. As per an article published on Bloomberg, Russia will likely disapprove any talks related to deepen the crude oil output cuts in the meeting slated on July 24 beyond the current limit effected by OPEC and some other oil producers.

US gasoline stocks fell 1.6 million barrels, compared with analysts' expectations for a 1.1 million-barrel gain, but were also in the upper half of the average range, EIA said.

The U.S. vaulting into the top ranks of exporters would have been unthinkable even a few years ago.

Without a significant fall in oil inventories or a decline in US drilling and production, Goldman said crude prices could fall below $40 per barrel.

OPEC Production was up last month but offset by the fact that NON-OPEC production was down.

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