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Stockpiles Fall Less Than Expected, Oil Prices Drop

15 June 2017

Earlier, the US Energy Information Agency (EIA) said in its report that OPEC crude oil production is expected to average 32.3 million barrels per day in 2017 and 32.8 million barrels per day in 2018.

Global oil output will expand faster than worldwide demand for oil next year, primarily as USA producers rack up production, and that could hamper exporters' efforts to prop up prices, the IEA said on Wednesday (Jun 14).

If that proves correct, non-OPEC suppliers will capture all the increase in demand next year, because the IEA predicts consumption will increase by only 1.4 million bpd.

Riyadh is leading an effort by the Organization of the Petroleum Exporting Countries, Russia and other oil producers to cut output by nearly 1.8 million bpd until March 2018 to curb oversupply.

Sign up now and get breaking news alerts delivered to your inbox. Over the past few years, technological advances have made USA shale oil profitable at much lower prices.

The declines followed data from OPEC Tuesday which indicated that member states increased production last month, despite reaching an agreement to trim output.

US shale production will surge to a record in July, the EIA projects. "Ongoing concerns about product demand is spooking the bulls, at a time that gasoline demand should be ratcheting up and driving on bigger crude draws".

Crude oil futures fell Wednesday morning, after weekly industry data showed a surprise build in usa stockpiles.

Inventories rose by 2.75 million barrels in the week to June 9 to 511.4 million, according to the American Petroleum Institute report, compared with expectations for a decrease of 2.7 million barrels.

"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 said.

For one, higher-than-expected shale oil production in the U.S. partly offset Opec and non-Opec production cuts at the beginning of this year. Its $2-trillion economy imports more than 80 percent of crude requirements and the International Energy Agency expects it to be the fastest-growing consumer through 2040.

The Organization of the Petroleum Exporting Countries agreed to extend that deal that began in January through March 2018, but ongoing growth in USA production, along with exemptions for non-members Nigeria and Libya, have offset those cuts to some extent.

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. So far in June, Saudi exports to the United States were below 1 million bpd, according to shipping data and industry sources.