Shale firms pump out an oil surplus

Gladys Abbott
December 18, 2017

Oil prices edged up on Friday, lifted by the Forties pipeline outage in the North Sea, ongoing OPEC-led production cuts and a decline in global stocks, although rising US output kept a lid on markets. Prices were 0.1% lower for the week. "We expect crude to range between $55-65 per barrel based on IEA's CY2018 forecasts, which suggest incremental non-Opec supply of 1.6 mn bpd will exceed 1.3 mn bpd of growth", it added.

The International Energy Agency said 2018 "might not be quite so happy for OPEC producers" as USA output increases, but the agency expects a balanced market next year, with a supply deficit in the second half.

The disagreement caused Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S, to state, "Both can not be right; whichever way the pendulum swings will have a significant impact on the market".

But the IEA left global oil demand growth outlook unchanged 1.5 million bpd this year and at 1.3 million bpd next year.

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He went on to note that "I lean towards OPEC, and I also think that as long as Saudi Arabia and Russian Federation want to work together, there's a pretty good chance the OPEC view is going to prevail here".

"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.

Oil prices rose sharply between June and October, with Brent gaining around 40 percent in value.

In its monthly report out Wednesday, OPEC said that it doesn't see oil markets balancing until late next year as shale drilling heats up, throwing into doubt recent talk of plotting an exit strategy from its production cuts.

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