OPEC and other exporters such as Russia have agreed to keep production almost 1.8 mln bpd below the levels pumped at the end of last year. (File photo: AP)
Oil fell on Wednesday after reports showed global supply was rising and US crude inventories were still increasing, raising concerns the market could stay oversupplied for longer than expected.
Brent crude oil fell by 28 cents to $48.44 a barrel by 1330 GMT, while US crude futures were down 29 cents on the day at $46.17.
Crude prices have fallen more than 10 percent since late May, pulled down by heavy global oversupply that has persisted despite a move led by the Organization of the Petroleum Exporting Countries to curb production.
OPEC and other exporters such as Russia have agreed to keep production almost 1.8 million barrels per day (bpd) below the levels pumped at the end of last year and not to increase output until the end of the first quarter of 2018.
But adherence to the cuts is under scrutiny and the producer group said this week its output rose by 336,000 bpd in May to 32.14 million bpd.
Increasing output
Oil stocks are near record highs in some parts of the world, and producers outside the OPEC deal are increasing output.
Some analysts are not ruling out that a rapid drawdown in inventories could take place.
“Balancing .. is taking longer. But at some point, investors may be surprised to see that supply and demand is in balance and as soon as global inventories start to normalize and come down to the five-year average, then (they) might start to worry that we might even have a shortage in the market,” ABN Amro chief energy economist Hans van Cleef said.
The International Energy Agency said on Wednesday it expected growth in non-OPEC supply to be higher next year than growth in overall global demand.
“For total non-OPEC production, we expect production to grow by 700,000 bpd this year, but our first outlook for 2018 makes sobering reading for those producers looking to restrain supply,” the IEA said in its monthly oil market report.
“The outlook for oil hinges on the effectiveness of the OPEC cuts relative to the supply increases from US shale,” said William O'Loughlin, analyst at Australia's Rivkin Securities.
Data from the American Petroleum Institute showed on Tuesday that US crude stocks rose by 2.8 million barrels in the week to June 9 to 511.4 million, compared with expectations for a decrease of 2.7 million barrels.
The oil market needs strong demand to help offset the rapid increase in supply.
Global energy demand grew by 1 percent in 2016, roughly in line with the previous two years, but well below the 10-year average of 1.8 percent, BP said in its benchmark Statistical Review of World Energy on Tuesday.
