OPEC acknowledges supply cuts didn't work

WTI Crude Oil

Earlier Wednesday, OPEC projected that US and other non-OPEC supply growth will outpace global demand growth in 2018, raising the risk of imbalance in the oil markets and lower crude prices. Opec said on Wednesday that oil consumption was expected to grow by 1.62-million barrels a day in 2018.

The IEA said global oil supply eased to 97.9m bpd in February, though strong production growth in the United States is expected to boost non-Opec output by 1.8m bpd compared to 760,000 bpd in 2017.

A spokesman for the energy ministry said that Saudi Arabia along with the OPEC and non-OPEC oil producers participating in a global supply cut agreement "remain committed to pursuing the common objective of restoring inventories back to their normal levels". This suggests the efforts by OPEC and Russian Federation to clear the global oil glut by cutting supplies are not working as well as they expected. They have extended the pact until the end of 2018.

Global crude oil prices fell in the first half of February, before stabilising later in the month. But it has also encouraged a flood of shale, fuelling a debate about the curbs' effectiveness.

Refined products inventories are also being winnowed down.

Crucially, the forecast now acknowledges that oil supply will outpace demand this year, a conclusion that the IEA had been predicting for a few months.

WTI Futures for April delivery were trading at $62.16 a barrel in Asia at 9:45pm ET, up 0.19%. for May delivery, traded in London, were up 0.20% at $65.62 per barrel. The contract rose 25 cents to $60.96 on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $60.81 a barrel at 0145 GMT, up 10 cents, or 0.16 percent, from their previous close.

Still, surging USA output continued to stoke fears.

"The EIA is forecasting U.S. oil production will lift 14.8% to 10.70 million barrels per day this year, before rising another 5.3% to 11.27 million barrels per day next year". As OPEC expects demand to increase by 1.62 million barrels per day over the year, it will leave a slight surplus on the markets and may trigger a prolongation or prolongation the yield limits now in force. Distillate inventories fell by 4.36 million barrels to the lowest level since December.

OECD commercial stocks rose in January for the first time in seven months to reach 2 871 mb.

Think Spring. Natural gas prices are being supported by this nasty late winter, but if you look at the calendar it will not last.

Oil markets remain volatile due to excess supply.

US crude oil exports went to 37 destinations in 2017, compared with 27 destinations in 2016. US crude oil production reached 9.3 million b/d in 2017, a 0.5 million b/d increase from 2016. Is the global market just showing a typical seasonal lull, or warning of something more ominous?

The IEA said global crude demand would pick up this year, which was "reassuring" to investors, said Phillip Streible, senior market strategist at RJO Futures in Chicago.

Restraint shown by United States producers supports Goldman Sachs Group Inc's bullish oil view, the bank said in a report. That is a 90,000 barrels per day upward revision from its earlier forecast as the agency sees "very strong starts" for China and India oil demand this year.

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