News Worms
News Worms

Oil prices struggle on doubts OPEC can rein in oversupply

In its first forecast for 2018, the International Energy Agency said Wednesday it expected countries outside the cartel to increase production by about 1.5 million barrels per day, outstripping the growth in global demand.

According to the Energy Information Administration, US crude inventories fell by 1.7 million barrels in the week ending June 9, with the original market expectation registering around 2.7 million. USA crude was $1.52, or 3.3 percent, lower at $44.94.

Inventories fell due to a rise in U.S. crude oil refinery demand to 17,256,000 bpd (barrels per day) on June 2-9, 2017.

After rising for three consecutive days, U.S. West Texas Intermediate crude futures fell $1.73, or 3.7 percent, to settle at $44.73 per barrel, its lowest close since November 14.

Oil prices settled lower for a second straight day on Thursday, as the market was unable to rebound from Wednesday's decline on the back of a surprise build in US gasoline inventories and ongoing worries about heavy global supply.

With supplies plentiful, strong demand is needed to support the market, but there are signs of a slowdown.

This implies that crude oil price, which stood at $48.27 per barrel, last week, would increase to $51 per barrel or more, signalling a good omen for Nigeria, which depends on crude oil for its fiscal responsibilities.

Oil prices dropped to six-week lows on Thursday, under pressure from high global inventories and doubts about OPEC's ability to implement agreed production cuts.

It said Tuesday that output rose 1% from April amid gains in Iraq, Nigeria and Libya-the latter two are exempt for the current production-cut deal.

"Gasoline consumption is now about 5 percent lower than in the same week previous year", Thomas Pugh, a commodities economist at London-based Capital Economics, said in a note.

Last month, OPEC and some non-OPEC producers extended a deal to cut 1.8 million barrels per day in supply until March 2018.

Growth in oil supply will outstrip growth in demand during 2018, driven by increasing production from U.S. shale and other countries outside Opec, the International Energy Agency (IEA) said.

OPEC cut its estimate of oil supply growth from producers outside the group this year to 840,000 bpd from 950,000 bpd, following the decision to extend the curbs.


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