OPEC sees more oil supply outside the group, countering its cuts

The world's biggest crude exporter is conceding ground to enact a steep oil production cut in order to prop up the low global price of oil, causing the Kingdom to rapidly lose market share and influence over other OPEC members.

USA oil production rose to more than 9.3 million bpd last week, highest since August 2015.

On Thursday, oil prices rallied as a larger-than-expected weekly draw in US crude inventories C-STK-T-EIA of 5.3 million barrels suggested that output cuts by the Organization of Petroleum Producing Countries (OPEC) and other producers were helping reduce a global glut in crude, analysts said.

He added that the market had continued to confound expectations since the Organization of the Petroleum Exporting Countries and other producers agreed past year to cut output, as OPEC was no longer a lone heavyweight.

The report said that balancing the market would "require the collective efforts of all oil producers" and should be done "not only for the benefit of the individual countries but also for the general prosperity of the world economy". The OPEC cuts have shown that unconventional oil production in the USA will keep coming back like a movie monster.

"U.S. tight crude output is expected to rise rapidly and increase by 600,000 bpd in 2017", OPEC said, using another term for shale.

"Prices have come up quite a bit this week, and it looks like the market just ran out of steam", Kyle Cooper, director of research with IAF Advisors in Houston, said by telephone. Saudi Arabia, the de-facto Opec leader, has said it expected cuts to be extended.

"Egypt will participate as an invitee but is not cutting production". Now, OPEC is revising upwards its estimates of how quickly supplies will grow outside of its membership this year by a whopping 64 percent.

USA light crude oil ended the day up 50 cents, or 1.6 per cent, at $US47.83. A lack of infrastructure limits its exports, according to the U.S. Energy Information Administration.

Citi analysts argue that the overarching expectation in recent years that prices would soon top US$60 per barrel may have given producers a false sense of security.

Scott Bauer, senior market strategist at Trading Advantage, and Bloomberg's Mark Barton examine oil prices.

"Crude oil production declined in the UAE, Libya, Iraq and Iran, but increased in Angola and Saudi Arabia", OPEC said in the report.

The increase, OPEC said, represents the biggest increase among countries within the oil producers' group.

US shale producers used the price spike that OPEC triggered earlier this year to lock-in revenues for 2017, 2018 and, in some cases, even 2019.

  • David Armstrong