Published: Fri, June 16, 2017
Economy | By Annette Adams

Global oil glut set to continue despite efforts to prop up price

Global oil glut set to continue despite efforts to prop up price

Oil prices wallowed near their lowest levels in seven months early on Thursday, hurt by high global inventories and doubts over OPEC's ability to implement production cuts.Brent crude futures were down 7 cents or 0.2 percent at $46.93 per barrel at 0053 GMT, after slumping almost 4 percent in the previous session.U.S.

The US, Brazil, Canada and other producers outside Opec will increase output next year by the most in four years, the IEA said in its first forecast for 2018.

Along with 11 non-Opec nations, the cartel has agreed a landmark deal to cut production by 1.8m bpd in the first half of the year, and last month the deal was extended for a further nine months as Opec works to rebalance the market.

In short, whenever oil demand rises and prices go up, it will be met by increased supply from the US.

Analysts said both benchmarks were dragged lower by a bigger than 4% drop in US gasoline futures RBc1 after the US Energy Information Administration (EIA) reported a 2.1 million-barrel increase in gasoline inventories last week.

Fall of 30 cents a barrel has been seen in Brent crude oil, which is weakest since May 5 and US light crude was down by 15 cents. USA crude futures CLc1, meanwhile, were down 3.4 percent to $44.92 a barrel, the lowest intraday level since May 5.

Low oil prices, high gasoline inventories and weak demand are generally driving the low prices.

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.

Oil prices plunged more than 3 percent today, but it wasn't OPEC's increasingly flimsy production cut coalition that had traders so skittish.

The agency continued to forecast an implied shortfall in supply relative to demand for the second quarter of this year. 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.

Crude prices have fall by more than 10 percent since late May, pulled down by a supply glut that persists. Output at major American shale fields will reach a record in July, according to the EIA.

However, a rising output of shale oil in the United States offset the OPEC cuts and put downward pressure on crude oil price.

USA crude production has been steadily growing and last week rose to 9.33 million bpd, up 12,000 from the previous week, the EIA said.

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