Oil retreats with rattled stocks as USA voting gets underway

Troy Powers
November 12, 2016

The International Energy Agency warned Thursday that oil markets will remain awash with surplus volume for all of 2017 unless OPEC comes through with a promised production cut at the end of November.

Members of the Organization of the Petroleum Exporting Countries (OPEC) have failed to curb production as agreed two months ago, with their output hitting new all-time high, a global energy watchdog says.

The non-OPEC oil supply will stand at 56.20 million barrels per day in 2016, according to OPEC's monthly oil market report (MOMR) released Nov.11.

In the report, OPEC trimmed its forecast of non-OPEC supply this year, although supply growth in 2017 is put at 230,000 bpd, little changed from last month.

Brent crude fell 26 cents at $46.10 a barrel by 10:36 a.m. (1036 GMT). Brent crude, the global standard, traded at $46.68, down 12% over the month.

A report by industry group the American Petroleum Institute showed USA crude inventories rising by 4.4 million barrels last week, weighing on oil.

"President Obama from the start of his election worked towards a detente with Iran and we can't be sure that President Trump will continue in the same direction". Crude oil production rose by 0.8mb/d to 97.8mb/d in October, the IEA cited OPEC and non-OPEC members increasing production despite efforts to reach an accord on output.

Market-watchers are concerned and doubtful as the details of how much the cartel will cut oil output, and which countries will bear the brunt of the cuts are absent.

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That in turn, would mean that other OPEC members would have to cut production between 1.6 to 2.3 million barrels per day.

Iran's reported production increase of 210,000 barrels in October exceeds the combined gains of the previous five months, OPEC's data show.

Separately, the US government updated its short-term outlook and said that the recent decline in domestic oil production may not be as severe as expected just a month ago.

OPEC, led by Saudi Arabia, decided in November 2014 against curtailing production to support oil prices and instead pump at capacity to increase market share.

"The pressure on OPEC to come up with a deal only increases in the wake of Trump's victory", UBS analyst Giovanni Staunovo said. Still, output wont match 2015, which was the biggest year for USA production in 35 years.

The IEA boosted estimates for supplies from outside OPEC in 2017 by 110,000 barrels a day due to an improved outlook for Russian Federation, which is set to add 190,000 barrels a day next year.

Much like the International Energy Agency, even the EIA believes that the global demand for crude oil will remain strong because of strong global economic data.