Oil slips as data points to fast-growing supply

Oil surges

Oil surges

In its latest monthly report, the IEA expected a larger than expected increase in non-OPEC output of 700,000 for 2017 and the IEA also expected a further increase for 2018.

OPEC's own compliance with the cuts has been questioned, and the producer group said in a report this week that its output rose by 336,000 barrels per day in May to 32.14 million barrels per day.

Analysts estimated, on average, that crude stocks fell 2.7 million barrels in the week ended June 9.

Gasoline inventories now sit at 242.4 million barrels, or 9 percent, above the five-year average of 223 million barrels, according to EIA data. "I would think that at some point the market is going to be pricing in even greater risks that the Fed might be moving too quickly", said Mark Cabana, a rates strategist at Bank of America Merrill Lynch in NY.

But those efforts have been blunted by a massive boom in production by US shale operators, who have become much more efficient.

The IEA said in a separate report earlier Wednesday it expected growth in non-OPEC supply to outpace demand growth next year.

The U.S., Brazil, Canada and other producers outside the Organization of Petroleum Exporting Countries will increase output next year by the most in four years, the IEA said.

Luke Bryan opening Game 6 broadcast from honky-tonk roof
Nashville Predators left wing Colin Wilson skates a drill during practice Sunday, June 4, 2017, in Nashville, Tenn. The opening faceoff was delayed a few seconds after someone threw a catfish onto the ice - a Predators thing.

Benchmark Brent crude settled 43 cents higher at $48.72 a barrel while US light crude settled up 38 cents to $46.46 a barrel.

As a result, despite the Opec deal, oil stocks might not fall to the cartel's desired level "until close to the expiry of the agreement in March 2018", the agency said.

Meanwhile, US drilling activity has continued apace, driving up US output by more than 10 per cent since mid-2016 to above 9.3 million bpd.

"Abu Dhabi swiftly enforced a ban on oil tankers linked to Qatar calling at ports in the UAE, which could lead to a backlog of cargos and increased shipping costs", the report says.

Oil inventories have remained high several months into a deal by OPEC producers with non-member nations to reduce supply by 1.8 million bpd. Also countries like Libya and Nigeria produces more oil. OPEC output rose in May as Libya and Nigeria revived production halted by attacks and political crises, a report from the group showed Tuesday.

"While the demand is robust, there is a serious likelihood that prices will sink next year to $30-$35 a barrel and will stay there for a while", Fesharaki added.

The IEA has revised its forecast upwards for USA oil production this year, and said Brazil and Canada were also expected "to make further gains".

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