Crude oil price increases in past months have stalled as non-OPEC producers, mainly the U.S., continue to pump out product and global supply is likely to outpace demand in 2018, the International Energy Agency (IEA) said on Tuesday.
Advertisement
The U.S. Energy Information Administration last week said that it expects domestic crude oil production to rise by more than previously expected this year. Ed Morse, global head of commodities research at Citigroup, told The Wall Street Journal that USA shale could wreck the oil market once again.
OPEC and its partners, including Russian Federation, have curbed supply since January 2017 in a bid to drain global inventories in an agreement that continues through the end of the year.
The EIA expects that U.S. crude output may rise to 11 million bpd by the end of the year.
Oil prices rose by 1% on Monday, recovering some of last week’s steep losses as Asian stock markets found a footing after days of chaotic trading.
The IEA also confirmed its forecast that the US would become the world’s leading energy producer by 2019. However, Russia stands to gain more from higher oil prices than increased production.
The manic American pumping, which the IEA estimates will average 10.4 million barrels a day this year, could cause a glut to return to global markets. He estimates USA crude could surpass 12 million barrels a day next year.
The latest readings from OPEC show that in 2017 the oil demand was 97 million barrels per day, which is 1.6 million barrels more than the previous year.
Crude edged lower after an industry report was said to show USA crude and gasoline inventories are continuing to expand.
For its part, OPEC remains concerned about the level of production by US shale producers and the cartel is urging its USA rivals to pare output to support prices.
OPEC and its allies need to start planning an exit from their production agreement with the goal of capturing at least some incremental market demand in 2018 and 2019 while preventing another slump in prices. Supply growth from the US alone could equal total global demand growth. His Excellency, who remains Chairman of the Joint Ministerial Monitoring Committee for the OPEC non-OPEC Vienna Agreement, said he was “flattered” to receive the accolade.
The IEA said oil prices, which briefly touched a high of $71 a barrel in January, could be supported even if USA production rises, provided global growth remains strong, or if unplanned supply outages persist.
The planned sale of SPR barrels, meanwhile, comes as the United States rivals Saudi Arabia in terms of oil production. He also appended that because the United States was necessarily a free market for oil, its production has gone up and down with the oil price.
“Another sobering thought is that it is not just a matter of production: trade patterns are changing”, they said.
Advertisement
More than three dozen countries participated in a broad-based global exercise meant to simulate a coordinated response to oil supply disruptions, the IEA said.
