Further oil production restriction on the way

Crude Oil

Crude Oil

And although OPEC nations, along with Russian Federation - another top oil exporter - are set next week to extend a supply cut aimed at helping stabilize prices, surging output and exports from the US will likely more than make up the difference.

According to secondary sources in OPEC's closely watched Monthly Oil Market Report published on Thursday, the cartel's output hit a new low in recent years and was at the lowest in five years in June, just ahead of OPEC and its allies rolling over the production cuts into March 2020. But supply is now well in excess of demand, said the Paris-based institution that provides advice to oil-consuming nations.

OPEC also said its oil output in June fell by 68,000 barrels per day (bpd) to 29.83 million bpd, above the 2020 demand forecast, suggesting that there will be a 2020 supply surplus of over 500,000 bpd if OPEC keeps pumping at June's rate. As a result, there was an oversupply of 900,000 barrels per day. Despite rising tensions between the USA and Iran, supply disruptions in major producers like Venezuela, Libya, Russia and Mexico, and surging demand amid the height of the US summer driving season, Brent crude oil - the benchmark for global prices and a bellwether for USA gasoline - was hovering around $66 per barrel as of Friday morning, about $10 lower than the same point past year.

In its montly report, the IEA said, "Market tightness is not an issue for the time being and any rebalancing seems to have moved further into the future".

The IEA said that it was sticking for the time being to its current forecasts for economic growth, but "there are indications of deteriorating trade and manufacturing activity".

"Factors that could influence the pace of oil demand growth in 2020 include macroeconomic developments in major consuming countries, the displacements of heavy distillates with natural gas and other fuels, subsidy programmes and plans for their removal, the effect of commissioning/delays/closures of mega projects in the downstream and fuel efficiency programmes, especially in the transportation sector", the report said. The International Energy Agency (IEA) predicts this in a new report. "On the positive side, the mood surrounding the U.S./China trade dispute appears to have improved and the resolution of outstanding issues would be a massive boost to economic confidence".

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