The IEA, which represents 29 oil-producing countries, is predicting slower growth in demand for oil because of a more pronounced economic slowdown during the third quarter of the year, among other factors. “Kuwait and the UAE hit their highest output ever and Iraq lifted supplies”.
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But overall supply levels were still put at 96.9 mbpd by the IEA, which noted that “near-record OPEC supply just about offset non-OPEC declines”.
In 2017, the IEA expects non-Opec countries’ output to be up 380,000 bpd; this year, it sees production plummeting by 840,000 bpd.
World oil prices dropped Tuesday in response to the IEA report, which came a day after OPEC said that non-OPEC producers, such as Russian Federation, would see output rise in 2017, revising its previous expectations of a drop.
Benchmark 10-year notes US10YT=RR fell 18/32 in price to yield 1.73 percent, after rising as high as 1.752 percent, the highest since June 3. The price of oil has plunged over the last two years as an enormous supply glut built up while growth in demand slowed. China’s industrial output grew the fastest in five months as demand for products from coal to cars rebounded thanks to higher government spending and a year-long credit and property boom. US West Texas Intermediate crude was down 2.53% at $45.12, while Brent crude was 2.17% down.
“However, the opposite now seems to be happening”, it said. Saudi Arabia has overtaken the USA as the world’s largest oil producer – when non-crude forms like natural-gas liquids are included – a ranking America held since April 2014.
The DOE report, meanwhile, noted that the pipelines created to run from the reserve to the rest of the oil market are instead running in the opposite direction to accommodate oil running from shale reserves to Gulf Coast refineries.
This makes life hard for the oil cartel.
Today’s stock participation was above the recent average, as more than 1B shares changed hands on the NYSE floor. Russia, alongside the U.S., is one of the two biggest non-OPEC producers. For example, at April’s massively anticipated OPEC meeting about a freeze in production, Saudi Arabia refused to cooperate unless Iran joined in any production freeze, and as a result the meeting ended up as a damp squib. “Consequently, stocks of oil in OECD countries are swelling to levels never seen before”.
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While both Saudi Arabia and Russian Federation seem to be talking a good game on cutting production, there hasn’t been any decisive action on a freeze, and that is what seems to be dominating market thinking right now.
