Middle East production has climbed to a record while USA output slumps, a sign that OPEC’s strategy of defending market share is succeeding, the International Energy Agency said.
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The Organization of Petroleum Exporting Countries produced almost 32.9 million barrels of oil a day in June, according to its monthly statistical bulletin.
At press time, USA benchmark West Texas Intermediate crude had fallen 1.52 per cent to $46.09 while Global benchmark Brent Crude fell 1.69 per cent to $47.65 a barrel.
The U.S. Department of Energy’s Energy Information Administration (EIA) will release official weekly inventory data later on Wednesday. Commercial crude oil inventories fell by 2.5 million barrels in the week ended July 8 but still remained at historically high levels.
At about 0340 GMT, US benchmark West Texas Intermediate fell 27 cents, or 0.58 per cent, to Dollars 46.53 while Brent was 36 cents, or 0.74 per cent, lower at USD 48.11.
The US inventory report pressured prices in a market already bearish after the Paris-based International Energy Agency warned about a global oil supply glut.
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OPEC’s preliminary data indicates that global oil supply increased by 0.40 mbpd to average 94.33 mbpd in June 2016, compared with the previous month.
The oil cartel also issued a warning that the UK’s recent vote to quit the European Union could choke oil demand across the continent and pointed to the Brexit decision to leave the EU as a risk to global economic growth in 2017 which could potentially send demand for oil lower. The IEA said that “although stocks are close to topping out, they are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices”.
Production from the Organization of Petroleum Exporting Countries climbed to an eight-year high last month, boosted by the re-admission of Gabon, which swelled the number of members to 14, the IEA said.
It notes that later in the year “we may well see crude oil stocks fall back but there is a risk that, unless demand turns out to be stronger than we now anticipate, products stocks could rise still further and threaten the whole price structure”.
For 2017, the IEA forecast a 1.3-million-bpd increase to 97.4 million bpd, largely thanks to demand in non-OECD countries, led by India and China.
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OPEC, led by Saudi Arabia, has been waging a price war since 2014 with oil producers outside the group, particularly in the US, in a bid to defend its market share. A report from the International Monetary Fund finds the US economy may be something of a safe haven for investors, though the USA economy itself has lost momentum because of lower oil prices and a strong dollar.
