Iraq takes Saudi crown to become oil king of key Asian market

Growth in oil supply next year is expected to outpace an anticipated pick-up in demand that will push global consumption above 100 million barrels per day (bpd) for the first time, the International Energy Agency (IEA) said on Wednesday. China also said crude oil production fell 3.7% in May from a year earlier to 16.26 million metric tons, or 3.83 million barrels per day (bpd), the lowest daily level on record.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $45.96 per barrel, down 50 cents, or 1.1 percent.

Sign up now and get breaking news alerts delivered to your inbox. Iraq also passed Saudi Arabia as the number one supplier to India, the fastest growing oil consumer.

US interest rates futures rose after the weak data, suggesting traders reduced their bets on a possible third Fed interest rate increase in 2017. USA crude was 45 cents lower at US$46.01.

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The IEA's baseline for determining when oil stocks can be considered as having rebalanced is when they return to their five-year average, or 292 million barrels below where they are today.

Oil inventories have remained high several months into a deal by OPEC producers with non-member nations to reduce supply by 1.8 million bpd.

Crude prices have fallen more than 10 per cent 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.

As per the ASB, in 2016, world crude oil production inched up by 0.35 mb/d, or 0.5 percent, as compared to 2015, to reach 75.48 mb/d, marking the seventh consecutive year of growth. Brent futures are trading at higher prices for further-dated contracts, which is an encouragment for more production rather than less.

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Producers hedge by buying a variety of financial options to secure a minimum price for crude and safeguard future production.

At the same time, overall global demand is expected to pick up by 1.4 million bpd to 99.3 million bpd next year, the IEA predicted. Yet the group lowered expectations for non-member Russian Federation, which has been cooperating with Saudi Arabia on production, by 200,000 bpd, or about two-thirds of the original estimate.

Crude oil prices were down more than 1 percent in overnight trading, but moderated ahead of the start of trading in NY.

Trade data show OPEC shipments to customers averaged around 26 million bpd in the last six months of 2016 and are set to average around 25.3 million bpd in the first half of this year.

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The EIA released its monthly report on drilling activity Monday showing that oil production from seven major USA shale plays is projected to rise by 127,000 barrels a day to 5.475 million barrels a day in July from June.


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