Oil stumbles on dispute OPEC to limit in oversupply
Oil prices floated near their lowest levels in seven months early on Thursday, disabled by high global inventories and doubts over OPEC’s ability to perform production cuts.
Brent crude futures were at $46.92 per barrel at 0643 GMT, down 8 cents from their last close and after falling nearly 4 percent in the previous session.
U.S. West Texas Intermediate (WTI) crude futures were down 14 cents at $44.58 per barrel.
Both benchmarks are near levels from late November 2016 when production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) were announced in an effort to prop up prices.
Senior market analyst at futures brokerage OANDA in Singapore, Jeffrey Halley said, “For OPEC, an oversupply headache became a migraine.”
Instead of expiring this month, Brent and WTI are down some 12 percent since their opens on May 25, when the agreement to cut was extended to the end of the first quarter next year.
That’s because some OPEC members, including Nigeria and Libya, have been free from cutting and their climbing output is seen undermining efforts led by Saudi Arabia.
Analysts at AB Bernstein said in a note, “OPEC 2017 year-to-date exports are only down by 0.3 million barrels per day (bpd) from the October 2016 baseline.”
OPEC’s vow was to diminish some 1.2 million bpd, while other producers including Russia would bring the total reduction to almost 1.8 million bpd.
Meanwhile, production in the United States , which is not participating in the deal, has soared by 10 percent over the past year to 9.33 million bpd.
AB Bernstein said, “Production growth in Libya and Nigeria and continued rig additions in the U.S. are complicating the picture, raising doubts on OPEC’s strategy. For OECD inventories to return to the normalized levels, OPEC needs to drain by 34 million barrels a month or 1 million barrels for the next 10 months. This looks challenging.”
The rise in U.S. production has shocked most analysts. The U.S. Energy Information Administration (EIA) highlighted its prediction for U.S. output growth in 2017 to 460,000 bpd from a predicted decline of 80,000 bpd in December.
OPEC now forecasts that U.S, compared with an expected decline of 150,000 bpd last December will increase its production by 800,000 bpd in 2017.
Compared with a prediction that production would be flat in its November assessment, the International Energy Agency is forecasting U.S. output to grow by 620,000 bpd in 2017.
The IEA awaits oil supplies next year to outpace demand in spite of utilization hitting 100 million bpd for the first time.