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While OPEC producers have decided to roll over the production cuts to the end of 2018, non-OPEC supply will increase more than previously expected, and total supply growth could exceed demand growth next year, the International Energy Agency (IEA) said in its monthly Oil Market Report on Thursday.
Although the ingenuity and flexibility of the U.S. shale patch are challenging precise forecasts, when IEA’s outlook for U.S. crude oil production is added to the forecasts for other producers, non-OPEC production could increase by 1.6 million bpd in 2018, which is an upward revision of 200,000 bpd compared to last month’s report, the Paris-based agency said today.
“On considering the final component in the balance - non-OPEC production - we see that 2018 might not be quite so happy for OPEC producers,” the IEA noted.
The agency’s current outlook for 2018 “may not necessarily be a happy New Year for those who would like to see a tighter market”, as total growth in supply could exceed demand growth, which is currently expected at 1.3 million bpd for 2018. In the first half of 2018, global oil surplus could be 200,000 bpd before reverting to a deficit of around 200,000 bpd in the second half next year, “leaving 2018 as a whole showing a closely balanced market,” according to the IEA.
“A lot could change in the next few months but it looks as if the producers’ hopes for a happy New Year with de-stocking continuing into 2018 at the same 500 kb/d pace we have seen in 2017 may not be fulfilled,” the IEA said.
Oil prices were seesawing on Thursday, wavering between gains and losses, after the EIA reported on Wednesday a draw of 5.1 million barrels of crude last week, but another build—by 5.7 million barrels—in gasoline inventories. Weekly U.S. field production of crude oil jumped to another high last week, to 9.780 million bpd, EIA data showed.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.