Shale oil boom to hurt OPEC well into 2018

Oil surges

Oil surges

Crude prices have fall by more than 10 percent since late May, pulled down by an supply glut that persists despite a move led by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by nearly 1.8 million barrels per day (bpd) until the end of the first quarter of 2018.

In its regular Monthly Oil Market Report, OPEC said its May crude output pace rose by 336,000 barrels per day to just over 32.1 million.

Analysts estimated, on average, that crude stocks fell 2.7 million barrels in the week ended June 9.

Shipping data compiled by Bloomberg showed, Iraq supplied 1 million barrels a day and those supplies accounted for 23 percent of India's purchases last month, up from an average 19 percent in the previous four months.

"The numbers cast serious, serious doubt on whether there will be another hike this year", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY.

USA shale production will surge to a record in July, the EIA projects.

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"The revisions to non-OPEC supply growth have been much greater than the upward adjustments to world oil demand growth, accentuating the imbalance in the market", it said.

The shipments for the first five months of this year are slightly higher than the 25.4 million bpd the producer group exported via tankers in the same period in 2016.

USA crude fell 3.57 percent to $44.80 per barrel and Brent was last at $47.01, down 3.51 percent on the day.

Under the deal to support the market, OPEC is curbing output by about 1.2 million bbl/d and Russian Federation and other non-OPEC producers are cutting by half as much.

And at a meeting at the end of May, both OPEC and non-OPEC countries made a decision to roll over the output cuts for a further nine months.

Oil is extending its slump below $50 a barrel amid speculation increasing USA supplies will counter production curbs by the Organization of Petroleum Exporting Countries and allies including non-OPEC member Russian Federation.

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The OPEC production figures were for 13 members and did not include Equatorial Guinea, which joined last month.

"A lot of producers held back on locking in hedges in the first quarter because OPEC cut their historic deal and they thought there would be a linear shift higher in prices. The industry continues to turn a crude oil surplus into a gasoline and distillate product surplus", Andrew Lipow, president of Lipow Oil Associates in Houston said. Prices initially nudged higher after the world's top exporter Saudi Arabia outlined cuts to customers in July that included a reduction of 300,000 barrels per day (bpd) to Asia.

Low oil price will lead to rippling effect in the global market.

The energy group retreated 3.3 per cent as oil prices fell after reports showed global supply was rising and us crude inventories were still increasing.

The IEA has revised its forecast upwards for United States oil production this year, and said Brazil and Canada were also expected "to make further gains".

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