Oil supply will outpace demand by next year

Courtney Goldsmith
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Russian Oil Stops Flowing To Western Europe Thru Belarus
Despite growth in demand, supply will continue to rocket (Source: Getty)

Growing oil supply is set to outpace demand next year, unravelling the Organisation of the Petroleum Exporting Countries' (Opec) efforts to cut supply in order to support prices, according to a report.

Production outside Opec is expected to grow twice as quickly in 2018 as it will this year, with gains dominated by the US in particular, according to the International Energy Agency's (IEA) oil market report.

The Paris-based agency said its first outlook for 2018 is "sobering" reading for producers looking to restrain supply.

"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 2018, we expect non-Opec production to grow by 1.5m bpd which is slightly more than the expected increase in global demand."

Along with 11 non-Opec nations, the cartel has agreed a landmark deal to cut production by 1.8m bpd in the first half of the year, and last month the deal was extended for a further nine months as Opec works to rebalance the market.

Oil prices are trading lower this afternoon. Benchmark Brent crude futures were down 0.94 per cent at $48.26 a barrel at the time of publishing.

Yesterday, Opec said output among its members grew in May due to hiked production in Libya and Nigeria, which are exempt from the agreement to cut output.

Crude inventories of Organisation for Economic Co-operation and Development (OECD) countries rose by 18.6m barrels in April due to higher refinery output and imports. They stand 292m barrels above the five-year average and are higher than when Opec decided to cut output, the IEA said.

"Indeed, based on our current outlook for 2017 and 2018, incorporating the scenario that Opec countries continue to comply with their output agreement, stocks might not fall to the desired level until close to the expiry of the agreement in March 2018," the IEA said.

"A lot can change of course, but, as we said at the start, 2018 seems a very long way away."

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