Oil prices, on Thursday, July 13, crashed on worries about oversupply as the world’s energy watchdog warned that a long-awaited market rebalancing could be delayed due to weak compliance with production cuts among OPEC members.
In its closely watched monthly report, the Paris-based International Energy Agency (IEA) issued a stronger outlook for global oil demand, however, with consumption in Germany and the United States increasing in recent months.
Brent crude fell 34 cents to $47.40 a barrel by 0834 GMT and U.S. light crude was down 32 cents at $45.17.
Oil prices dropped in recent weeks to levels not seen since November 2016 as investors lost faith in a deal between OPEC and non-OPEC producers to reduce output, while U.S. shale oil production rose sharply.
“Each month something seems to come along to raise doubts about the pace of the rebalancing process,” the IEA report said.
“This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement.”
Global inventories remain persistently high after a modest drop among industrialized nations in May. Stocks are some 266 million barrels above the five-year average, the IEA said.
The Organization of the Petroleum Exporting Countries said on Wednesday that the world would need only 32.2 million barrels per day (bpd) of its crude next year, down 60,000 bpd from this year and about 400,000 bpd less than it pumped in June.
OPEC said its production rose by 393,000 bpd in June to 32.611 million bpd, thanks to extra output from Nigeria and Libya.
That came despite a pledge by OPEC to curb production by about 1.2 million bpd between January this year and March 2018, while Russia and other non-OPEC producers say they will hold back half as much.
OPEC’s compliance with cuts slumped to 78 percent last month from 95 percent in May as higher-than-allowed output from Algeria, Ecuador, Gabon, Iraq, the UAE and Venezuela offset strong compliance from Saudi Arabia, Kuwait, Qatar and Angola, the IEA said.
The demand outlook was also boosted after data showed China imported 8.55 million bpd in the first six months of the year, up 13.8 percent on the same period in 2016, making it the world’s biggest crude importer ahead of the United States, Reuters reports.