Middle East oil output rose to a record high in June, with production above 31 million barrels a day (mb/d) for the third consecutive month.
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The IEA, which advises industrialised nations on energy policies, said crude inventories kept rising last month and pushed floating storage, one of the most expensive methods of stockpiling, to the highest level in seven years.
Crude oil for August delivery on the New York Mercantile Exchange shed 51 cents, or 1.09%, to trade at $46.29 a barrel by 07:52GMT, or 3:52AM ET, after soaring $2.04, or 4.56%, a day earlier, amid a broad improvement in risk sentiment. Non-OPEC oil supply in 2017 is projected to decline by 0.1 mbpd to average 55.9 mbpd.
USA crude fell $2.10, or 4.5 per cent, to $44.70. Distillate stockpiles, which include diesel and heating oil, rose 4.1-million barrels, versus expectations for a 256,000-barrel increase.
“It’s bearish for oil if stockpiles gain because seasonally speaking, inventories tend to decline at least until mid-August”, Hong Sung Ki, a commodities analyst at Samsung Futures Inc., said in Seoul.
The build up in inventory has been fuelled by a surge in refinery production, which is now running 60 per cent higher than demand for the refined product.
India and China are forecast to grow by 7.2 per cent and 6.1 per cent respectively, compared to growth of 7.5 per cent and 6.5 per cent this year.
United States crude oil production has fallen by 12.3 percent since their 2015 peaks and by 8.74 percent since January this year to 8.43 million barrels per day, the lowest since June 2014, when the 2014-2016 oil price rout began. Analysts had expected a three million barrel decline, according to a Bloomberg News survey. The industry-funded American Petroleum Institute said stockpiles had climbed 2.2 million barrels.
“Crude supplies are down a little, but it doesn’t change the overall picture”, Finlon said.
Moreover, the agency points out that “When U.S. shale production was moving upward very fast, it became fashionable to talk of lower reliance on traditional suppliers”; but the Middle East’s market share is “an eloquent reminder that even when U.S. shale production does resume its growth, older producers will remain essential for oil markets”. “They remain at historic highs for this time of the year”.
The Organisation of Petroleum Exporting Countries (OPEC), which made this disclosure in its July oil and gas report released on Tuesday, noted that the country’s production has increased by 98,000 barrels per day (bpd).
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