A lightning fast rally in oil prices is reversing. Here's why

Randall Padilla
November 16, 2017

Oil prices dropped on Wednesday after the USA government reported an unexpected increase in crude and gasoline stockpiles, but an increase in refining runs and a drawdown in distillates helped prices bounce off session lows.

U.S. West Texas Intermediate (WTI) crude CLc1 settled down 37 cents to $55.33 a barrel.

During the week ending on 10 November, commercial crude oil inventories grew by 1.9m barrels from the previous week to reach 459m barrels, according to the Energy Information Administration, the US Department of Energy's statistical arm.

"Alongside an ever-expanding global population and the critical importance of reducing energy poverty, these growth rates mean energy demand is expected to increase by close to 100 million barrels of oil equivalent a day between 2015 and 2040", Barkindo said.

The report projects that by 2025, oil production in America will match that of Saudi Arabia, and by 2030, it will be exporting 30m barrels of oil and daily - 50% more than the single year yield of any other country in history.

"The oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 600,000 bpd followed by another, smaller, surplus of 200,000 bpd in 2Q18", the agency said.

"We expect prices to remain soft and move related to any rhetoric that comes out prior to those meetings from all of the involved parties", Adam Wise, who oversees an $8 billion energy portfolio at John Hancock Financial Services Inc in Boston, said by telephone.

Global oil demand is expected to keep rising over the next two decades, albeit at a steadily decreasing pace, according to a new report released Tuesday by the International Energy Agency.

According to the IEA, China will overtake the United States as the largest oil consumer around 2030, and its net imports will reach 13 million barrels per day in 2040.

The IEA said oil production will be driven by continued growth in energy-hungry industries.

"Even after some modest reductions to growth, non-OPEC production will follow this year's 700,000-bpd growth with 1.4 million bpd of additional production in 2018 and next year's demand growth will struggle to match this", the IEA said.

Global oil supply rose by 100,000 bpd in October to 97.5m bpd on higher production from non-Opec countries, and non-Opec oil supply is expected to rise by 700,000 bpd this year and 1.4m bpd next year, led by stronger output in the US.

Opec has yet to show it has convinced Russian Federation, one of its partners in the deal, that a decision to prolong output cuts is needed when the group meets in Vienna later this month.

Other reports by AllAboutTopnews

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