Oil prices threatened to fall through key technical levels on Wednesday after the government issued a bearish report on USA fuel stockpiles. Crude prices have fallen more than 10 percent since late May, pulled down by heavy global oversupply that has persisted despite a move led by the Organization of the Petroleum Exporting Countries to curb production. The oil price has declined more than 10 percent since the May agreement.
The oil market needs strong demand to help offset the rapid increase in supply.
It also put Iran’s refinery capacities growth rate per annum at 2.0 percent in 2016.
Increased oil production in the United States is hampering efforts to balance out market supply and demand, OPEC said on Tuesday.
Futures were little changed in NY, down 3.1 per cent for a fourth weekly decline. Additionally, the IEA projects that non-OPEC nations collectively will expand their output by 700,000 B/D in 2017 and 1.5 million B/D in 2018, slightly more than the forecasted growth in global demand.
Inventories jumped by 18.6 million barrels in OECD countries in April, meaning the total is above the five-year average by 292 million barrels and higher than before OPEC’s production-cut deal in November, according to the International Energy Agency’s monthly report.
Oil headed for the longest run of weekly losses since August 2015 as USA crude stockpiles remain stubbornly high and as Libyan production climbs toward the most in four years. “As a result, oil inventories remain high, particularly in the US-a key factor behind persistent weakness in oil prices”, pointed out a World Bank report on Global Economic Prospects.
Distillate inventories fell this week by 1.451 million barrels, while inventories at the Cushing, Oklahoma, site fell by 833,000 barrels after last week’s dip of 1.56 million barrels.
The EIA released its monthly report on drilling activity Monday showing that oil production from seven major USA shale plays is projected to rise by 127,000 barrels a day to 5.475 million barrels a day in July from June.
“The outlook for oil hinges on the effectiveness of the OPEC cuts relative to the supply increases from USA shale”, said an analyst at Australia’s Rivkin Securities, William O’Loughlin. Production rose by 12,000 barrels a day to 9.33 million barrels per day.
In a report on Wednesday, the International Energy Agency said rising US output will contribute to supply growth exceeding demand growth in 2018.