Oil fell for a second trading day in a row on Monday, after the Organization of the Petroleum Exporting Countries revised up its oil output forecast from non-member countries for 2017.
Demand for crude from OPEC will average 32.48 million barrels per day in 2017, OPEC said in a monthly report. That is down from the previous forecast of 33.01 million bpd. OPEC also expects non-OPEC supply to rise by 200,000 bpd in 2017, versus a previously forecast 150,000 bpd decline. On top of that, the forecast for this year was revised up by 180,000 bdp.
OPEC is suspected to have revised its expected barrel per day crude outputs in accordance to the news that US crude drillers added more rigs for a tenth week running, speculators also cut their bullish bets by most in three months. The increased oil drilling activity in the United States indicated that producers can operate profitably around current levels.
OPEC also cited factors including the start up of the long-delayed Kazakhstan’s Kashagan giant oilfield and a lower-than-expected decline in US shale output, and said the immediate outlook was far more production. What also added to the oil’s price decline is the dollar’s rise as investors priced in a greater chance of US interest rates rising next week.
“It is expected that there will be higher non-OPEC production in the second half of 2016 compared to the first half,” OPEC said in the report.
The chances of larger surplus than expected added to the challenge of OPEC and non-members such as Russia, who are making a renewed attempt to restrain supplies. US crude was down 112 cents, or 2.44%, to $44.76 on the New York Mercantile Exchange while global benchmark Brent fell 107 cents, or 2.23%, to $46.94 on the ICE Futures Europe exchange, half its level of mid-2014.
Despite this, traders are still eyeing statements about a potential freezing of oil output closely, even if a broad agreement to meaningfully rein in oversupply was not currently expected. If it indeed happened, analysts doubt that it would successfully raise prices as most exporters are pumping oil at or near record levels, and have learned to do so at lower prices.
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