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Oil prices decline as doubts grow over OPEC's supply cuts

19 Juin 2017

Importantly, the IEA expected the increase in non-OPEC supply next year to be higher than the growth in overall global demand.

"This is very unusual for this time of the year, when gasoline demand is supposed to pick up", said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany.

The Energy Information Administration said Wednesday that gasoline inventories, one of the products that crude is refined into, unexpectedly rose by roughly 2m barrels against expectations for a decline of 457,000 barrels.

Brent has dropped back below $50 since the OPEC meeting.

Oil stocks are near record highs in some parts of the world, and producers outside the Opec deal are increasing output.

The continuous rise in the U.S. production further negated the impact of restriction in oil production.

More than half this growth will come from the US, which the IEA expects to increase production by 430,000 B/D in 2017 and 780,000 B/D in 2018.

Between 2012 and the middle of 2014, the organisation's members complacently enjoyed high prices but ceded market share to the US shale sector and other non-OPEC producers including deepwater projects.

Oil prices were down more than half a percent after hitting a six-month low on Thursday, remaining under pressure from high global inventories and fears that OPEC's agreed production cuts can not offset rising production elsewhere.

The dip in oil prices came on the heels of the projection by the International Energy Agency of an increase in production from non-members of the Organisation of Petroleum Exporting Countries.

Shale producers, in particular, can react quickly to market developments, because they are less capital intensive than other ventures.

It also put Iran's refinery capacities growth rate per annum at 2.0 percent in 2016.

But those efforts have been blunted by a massive boom in production by US shale operators, who have become much more efficient.

The U.S. benchmark for crude was down 56 cents to $45.90 a barrel after the report's release.

Libya has seen major supply disruptions from protests and contract disputes, but this week the National Oil Company said production was resuming at key fields.

The oil research firm noted that the considerable drop in Brent futures prices, soon after the OPEC's meeting in May 25, this year, was mainly caused by an extension of the production cuts, and high level of speculation in the market.