OPEC’s Oil Output Hits Three-Year High

Oil prices are off dramatically since OPEC’s meeting last week, with Brent losing more than 8 percent.

Global oil supply, too, was unrelenting, hitting almost 96 million barrels per day.

“Global inventories are set to keep building at least until late 2016, but at a much slower pace than observed this year”, the Paris-based IEA said in its latest monthly report.

Crude oil prices have slumped over 60 per cent from their June 2014 highs of over $110 a barrel for Brent crude to below $40 a barrel yesterday due to continuing supply glut and a slowdown in China, the world’s second-largest economy.

USA crude futures were at $36.53 a barrel, down 23c and just above Thursday’s bottom of $36.38 – the benchmark’s lowest mark since February 2009.

“The market will continue to watch oil carefully and we can expect a mixed to positive session if we don’t see any wild swings in oil prices like we did yesterday”, said Peter Cardillo, chief market economist at First Standard Financial in NY.

Most of that growth came from OPEC producers, notably Saudi Arabia which is battling to reclaim and defend market share from competitors as diverse as US shale producers, Canadian oil sands and Middle East rivals, Iran and Iraq.

The International Energy Agency (IEA) said OPEC’s annual revenue may fall to 550 billion USA dollars from an average of more than 1 trillion US dollars in the past five years. The ceiling remains at 30 million barrels per day, but the group has been exceeding this limit by an estimated 1.3 million barrels per day.

The IEA’s global demand growth for 2016 is now forecast at 1.2 million barrels a day, slightly lower than the current estimate for demand growth of 1.3 million barrels a day in the fourth quarter of this year.

Oil production in the USA has also been on the rise and is hovering around its record level.

In a note to investors, BMI said, “We have downgraded our Brent oil price forecast from $54 per barrel to $51 per barrel for 2016 on the basis of a weaker end to 2015 than previously anticipated”. “This downward trend should accelerate in coming months given various factors, mainly low oil prices and lower drilling activities”.