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Non-OPEC producers not part of the production cut deal continue to raise crude oil supply, which would continue to cap oil prices in the near future, the executive director of the International Energy Agency (IEA), Fatih Birol told Reuters on Wednesday.
“The production growth from non-OPEC countries is still there so I do not expect a price rise in the near future,” Birol said.
Since the beginning of this year, rising output from non-OPEC countries, mostly from the U.S., has constrained oil price gains—and to a large extent, offset OPEC’s efforts to clear the glut, rebalance the market, and prop up oil prices.
But when signs emerged that the global oversupply had started to reduce at a faster pace, oil prices rose in the third quarter, with Brent prices rising by some 20 percent to post their strongest Q3 performance since 2004, and WTI prices booking their strongest Q3 in 10 years.
The rally in recent weeks was also propped up by a supply scare last week over possible disruptions of oil exports from Kurdistan along with hedge funds buying long positions. That short rally has since faded with oil prices turning lower as concerns of rising supply, mostly from the U.S., replaced fears of disruptions, and as money managers started taking profits from the long positions that had looked overstretched.
Related: What Really Killed The Oil Price Rally
In addition, the number of oil rigs in the United States increased by 6 last week and the number of natural gas rigs decreased by 1. The oil rig count now stands 325 above the count one year ago.
Further depressing oil prices this week were surveys that OPEC’s production had increased in September, and the American Petroleum Institute (API) reporting on Tuesday a larger-than-expected gasoline inventories build of 4.19 million barrels for the week ending September 29, against an expected build of only 1.088 million barrels. The EIA report earlier today confirmed a gasoline stocks build, but of a more modest amount of 1.6 million barrels.
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.