Crude oil prices posted their biggest daily gain on Tuesday after OPEC and the EIA had predicted a decline in non-OPEC production in the previous months on the back of falling Chinese production, decreasing USA supplies and wildfires in Canada.
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The production estimate for last month is 8.6 million barrels a day, down by 200,000 daily barrels compared with June 2015 and almost 1.1 million daily barrels below the 9.7 million barrel-level reached in April 2015.
It said: “After the UK’s referendum to leave the European Union, economic uncertainty has increased”. “Potential negative effects have led to a downward revision of global economic growth in 2016 to 3.0 percent from 3.1 percent”.
Other forecasters including the International Monetary Fund have cut economic growth outlooks following the United Kingdom referendum.
Oil prices have halved from two years ago in a drop that deepened after OPEC refused in late 2014 to cut output to support prices, hoping that cheaper oil would curb higher-cost rival supply such as USA shale.
The International Energy Agency, the oil-consuming countries’ main energy watchdog, warned in its monthly oil market report on Wednesday that despite continued signs that the market is more balanced, the huge supply overhang built up over recent years still weighs on oil prices. Non-Opec supplies are set to decline by 0.9 mb/d in 2016, to 56.5 mb/d, before rising 0.2 mb/d in 2017. The price drop since 2014 has hit non-OPEC supply as companies have delayed or canceled projects around the world.
Oil output from OPEC, adjusted to include returning member Gabon, rose 264,000 bpd to 32.86 million bpd in June, OPEC said.
Crude production is expected to fall to 8.61 million bpd in 2016, compared with 8.60 million bpd forecast previously.
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“Russian crude and condensate output was largely unchanged month-on-month in June, at 10.84 mb/d [millions of barrels a day], but up 120 kb/d from a year prior”. Commercial inventories in industrialized nations rose by 13.5 million barrels in May to a record high of 3.074 billion, the Paris-based IEA said. “Middle East producers sustained record pumping rates, consolidating market share and pushing Opec’s total output 510 kb/d above one year ago”, IEA said. That’s smaller than the contraction of 900,000 barrels a day expected this year.
