Oil Market Rebalancing At 'Slower Pace

Oil Market Rebalancing At 'Slower Pace

According to the authority, non-OPEC production in 2018 will increase by 1.5 million barrels daily - a rate that will surpass the growth of global demand. More than half this growth will come from the USA, which the IEA expects to increase production by 430,000 B/D in 2017 and 780,000 B/D in 2018.

The world's oil glut is likely to persist next year in a blow to efforts by major producers to shore up the oil price by cutting output, according to a leading energy authority.

Commercial crude oil inventories also fell less than projected, highlighting weak demand even as the US enters its summer driving season, when many vacationers take to the roads.

Oil prices fell by one percent early on Wednesday after data showed a build in USA crude stocks and OPEC reported a rise in its production despite its pledge to cut back.

Due to projections of lower oil productions, the EIA reports that the responsiveness of the United States to global oil production may ultimately mean a greater supply in the country for 2018. By its estimates, total crude oil inventories in industrialized economies are 292,000 barrels above the five-year average.

While a fall in the price of any commodity normally sparks an increase in demand, Fesharaki told CNBC that "A drop in the price of oil is like an natural disaster or a tsunami" that actually could dampen demand.

OPEC and other producers have agreed to restrict output and cut production by 1.8 million bpd to March next year to soak surplus crude from the market.

"The rebalancing of the market is underway, but at a slower pace", the report said, acknowledging it will take more time to tighten the supply-demand balance. OPEC, a group of 13 oil producing nations, decided on November 30 to cut global crude oil output by 1.2 million barrels per day.

Rising non-Opec output has dented Opec and its allies' global pact to reduce oversupply in the market, which has pressured prices for almost three years.

"Oil is unlikely to find solace into the weekend either, with tonight's Baker Hughes Rig Count expected to deliver its now weekly increase of operational rigs", said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

The bearish inventory report added to the current negative sentiment on oil, after the International Energy Agency said Wednesday that non-Opec output was set to increase over the near term.