“The short-term outlook for non-OPEC supply in 2016 is being revised up due to the recovery in Canadian oil production following the vast wildfire in Alberta and rising rig counts in the USA for four consecutive weeks”, OPEC said. October Brent crude LCOV6, -0.20% on London’s ICE Futures exchange was flat at $44.98 a barrel.
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Increased oil production by OPEC countries and those outside the bloc, such as the U.S. and Russian Federation, over the past two years, had contributed to supply glut that dragged prices down to as low as $26 a barrel in February 2016.
The US Energy information administration forecast a fall in US crude oil production this year against its projection a month ago, due to a rise in drilling activity.
Saudi Arabia is leading the pack, producing almost 10.5 million barrels per day in July, up 30,000 compared to its output in June and also a new record high.
“The crude supply overhang is going to keep the price from rallying too strongly”, David Lennox, a resources analyst at Fat Prophets in Sydney, told Bloomberg News.
OPEC, which controls more than a third of the world’s oil supply, said its July crude production was up by 46,000 barrels a day from June, to 33.11 million barrels, on higher output from Iraq and Saudi Arabia. An upgrade in US oil production forecasts by EIA also weighed on sentiment.
Since 2014, Saudi Arabia has resisted pressure from other producers to cut production, betting that the low oil prices will force other exporters, such as the U.S., to cut their output. Analysts were expecting inventories to decline by a smaller 800,000 barrels from the previous week. The country’s crude production fell to 2.1 million barrels a day in July, its lowest since 2003, according to the OPEC report.
The agency also noted that US gasoline stocks fell 2.8 million barrels in the second-biggest weekly draw since mid-April, compared with expectations for a 1.1-million-barrel drop.
OPEC convened back in April, but Saudi Arabia made it clear it won’t agree to any cuts unless Iran signs on in kind.
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So the Algeria meeting is likely to be just an attempt by Opec to “verbally intervene” to slow the sell-off, says oil and gas analyst Charles Swabey at BMI Research. The Oil could drop again as the OPEC has left the 2017 oil demand growth forecast unchanged at 1.17mbpd, so a lower oil consumption could send the rate down again.
