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Why oil prices will remain weak
20 June 2017, 10:57 | Jan Cross
On Wednesday, crude prices fell almost 4 percent after US gasoline inventories rose unexpectedly and the International Energy Agency said growth in oil supply next year is expected to outpace demand even as global consumption exceeds 100 million barrels per day (bpd) for the first time.
OPEC'soil production jumped in May, despite the exporter group agreeing last month to extend its six-month deal to cap output into 2018.
Oil prices were down more than half a percent after hitting a six-month low on Thursday, remaining under pressure from high global inventories and fears that OPEC's agreed production cuts can not offset rising production elsewhere.
OPEC and other exporters such as Russian Federation have agreed to keep production nearly 1.8 million barrels per day below the levels pumped at the end of previous year and not to increase output until the end of the first quarter of 2018.
"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", the IEA'sreport read.
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The measures helped stabilise oil prices at the beginning of the year, with the global benchmark Brent crude sticking above $50 per barrel.
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However, the inventory increases reported last week by the API were confirmed by the EIA a day later, sending oil prices slumping 5% last Wednesday.
Recent U.S. economic figures, including retail sales, core inflation and industrial production have all been weak, raising concerns about the trajectory of the economy.
The International Energy Agency (IEA) said this week that oil supplies next year would still outpace demand despite consumption hitting 100 million bpd for the first time. That is $0.05 per gallon cheaper compared to a year ago.
United States inventories fell less than forecast last week, keeping supplies more than 100 million barrels above the five-year average, according to data from the Energy Information Administration on Wednesday.
As per the expert, there is too much oil on the market and the USA pumps more oil than before.
Rising U.S. oil output, particularly from shale drillers, is contributing to the ineffectiveness of the OPEC-led cuts, according to Reuters.
Energy services company Baker Hughes said last Friday that US drillers last week added rigs for the 21st week in a row, the longest such streak on record.
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