By Ediri Ejoh
There are indications that the increase in oil supply would outpace demand, thus resulting in low price next year.
The International Energy Agency (IEA) stated that the output of non-members of the Organisation of Petroleum Exporting Countries (OPEC) would grow in 2018.
According to the agency, “For total non-OPEC production, we expect production to grow by 700,000 bbl/d this year, but our first outlook for 2018 makes sobering reading for those producers looking to restrain supply.
“In 2018, we expect non-OPEC production to grow by 1.5 million bbl/d, which is slightly more than the expected increase in global demand.”
It stated that Brent crude futures extended losses after the report, falling 64 cents on the day to $48.08/bbl from around $48.26 prior to the release.
The agency noted that oil inventories across the world’s most industrial nations rose in April by 18.6 million barrels to 3.045 billion bbl.
It indicated that this was attributed to higher refinery output and imports, with stocks at 292 million bbl above the five-year average.
The agency stated that slowing demand growth in China and Europe in particular, as well as increasing supply, meant the deficit should narrow to 500,000 bbl/d from a prior estimate of 700,000.
It stated that OPEC and 11 rival exporters, including Russia, have agreed to extend a deal to limit supply by 1.8 million bbl/d to March 2018, in order to cut global inventory levels.
“We have regularly counselled that patience is required on the part of those looking for the rebalancing of the oil market, and new data leads us to repeat the message. ‘Whatever it takes’ might be the mantra, but the current form of ‘whatever’ is not having as quick an impact as expected.”
“Indeed, based on our current outlook for 2017 and 2018, incorporating the scenario that OPEC countries continue to comply with their output agreement, stocks might not fall to the desired level until close to the expiry of the agreement in March 2018,”
“Crude output from OPEC nations rose by 290,000 bbl/d in May to a 2017 high of 32.08 million bbl/d, still within the confines of the supply deal, after comebacks in Libya and Nigeria, which are exempt from cuts,” it added.