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Oil Price Could Plummet To $30 Per Barrel Says Fesharaki

15 June 2017

Crude output from Opec nations rose by 290,000 bpd in May to a 2017 high of 32.08 million bpd, still within the confines of the supply deal, after comebacks in Libya and Nigeria, which are exempt from cuts.

The American Petroleum Institute (API) reported an increase of 2.75 million barrels in crude oil inventories, against analysts' expectation of 2.7 million barrels of drawdown for the week ended June 9.

The International Energy Agency (IEA) warned on Wednesday that oil supply would outstrip demand next year, with output from the United States especially expected to make it hard to sop up the stubborn world oil glut. "I would think that at some point the market is going to be pricing in even greater risks that the Fed might be moving too quickly", said Mark Cabana, a rates strategist at Bank of America Merrill Lynch in NY. "OPEC should rethink its strategy of trying to verbally and artificially drive oil prices higher, because the result of that strategy is very resilient USA production".

The oil market needs strong demand to help offset the rapid increase in supply.

The shipments for the first five months of this year are slightly higher than the 25.4 million bpd the producer group exported via tankers in the same period in 2016.

It's not like the Saudis are enjoying significantly higher prices, with Brent crude ending on Tuesday at $48.72 a barrel, perilously close to the $46.38 close the day before the November 30 deal between OPEC and its allies.

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He said he would do that and added, "Because I have been very loyal to you, very loyal; we had that thing you know". Dozens of mayors across the United States have also committed themselves to meeting the terms of the agreement.

But the agency also trimmed its forecast for supply-demand deficit in the second half of this year from 700,000 bpd to 500,000 bpd, such has been the pace of growth in supply in the USA, which has made up for most of the Opec/non-Opec cuts.

Adding to the glut is an ongoing rise in USA production driven by shale drillers, which has pushed United States output up by 10 per cent over the a year ago to 9.3 million bpd, not far off top exporter Saudi Arabia. In contrast, China's imports from fellow Opec member Angola jumped 13.3% and those from allied producer Russian Federation gained 8.1%.

Some traders still hope that Wednesday's readings from the USA government will show declining inventories for oil and gasoline, as numbers from the Energy Information Administration don't always match those from the API.

Pulling the market for crude oil back into balance is taking longer than expected even as demand growth accelerates, OPEC said in a monthly report. For parties to the agreement, Russia's production during the second half of the year should fall by about 130,000 bsteels per day.

Gasoline led the drop in the oil complex Wednesday as traders fretted over weak demand and an unexpected rise in weekly supplies of the fuel during the summer driving season.

Oil Price Could Plummet To $30 Per Barrel Says Fesharaki