EIA reports smaller-than-expected rise in U.S. crude supplies, output climbs

Aaron Brown
September 14, 2017

Oil prices remain near $50/bbl despite nine months of output cuts by a coalition of oil producers led by OPEC and Russian Federation.

On the whole, prices may remain in a range in the short term but the monthly reports from the OPEC and IEA will be awaited for data on market balances and the level of global inventories.

"In 2018, non-OPEC oil supply is forecast to grow by 1.0 mb/d, following a downward revision to Russian Federation and Kazakhstan, totalling 0.1 mb/d". Still, that's about in line with the group's production last month, meaning OPEC won't be able to reverse its current output curbs if it wants to keep world markets balanced next year.

The longer-term focus, however, was on a possible extension to the 15-month production pact between members of the Organization of the Petroleum Exporting Countries and non-OPEC producers including Russian Federation. The producers are seeking to strengthen compliance with the cuts accord they reached previous year. It also raised its forecast for demand for the rest of this year and 2018. This was a 79,100 barrel-a-day drop from July.

Yet, the American Petroleum Institute indicated a slump of 7.9 million barrels in gasoline stocks, as distillate stocks slipped 1.8 million barrels while key refineries in Corpus Christi and Houston were offline.

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"Over the next two to three weeks, the EIA inventory numbers will be rather sloppy because you have production disrupted, refineries going offline and online", he said, noting that OPEC figures are a better signal of market stabilization, "That's why you have to look out further".

USA crude stocks rose sharply last week as refinery output declined further in the wake of Hurricane Harvey, causing gasoline stocks and distillate inventories to drop as well, the Energy Information Administration said on Wednesday.

The IEA revised down the global refinery throughput forecast for the third quarter of 2017 by 0.7 million bpd due to Harvey. Production fell for the second consecutive month due to the production cut deal. The IEA boosted its forecast on stronger-than-expected consumption in Europe and the USA, and said that inventories of refined products are subsiding to their five-year average.

"With U.S. export volumes expected to increase, the strategic importance of the Gulf Coast will only grow".

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