Expect Bigger Crude Oil Surplus in Y 2017, Output Jumps

Expect Bigger Crude Oil Surplus in Y 2017, Output Jumps

Expect Bigger Crude Oil Surplus in Y 2017, Output Jumps

$USO, $OIL

According to OPEC’s report, October’s supply boost mostly came from Libya, Nigeria and Iraq

OPEC reported an increase in its Crude Oil production in October to a record high led by members hoping to be exempt from the producer group’s attempt to curb supply, weighing on prices and pointing to a larger global surplus next year.

The Organization of the Petroleum Exporting Countries pumped 33.64-M BPD last month, according to figures OPEC collects from secondary sources, up 240,000 BPD from September, OPEC said in a monthly report.

The OPEC figures point to a bigger surplus than those of the International Energy Agency (IEA) and underline OPEC’s challenge in restraining supplies.

Crude Oil fell below 45 bbl after the report was released, having reached a Y 2016 high near 54 after OPEC’s deal was announced in September.

OPEC made little mention of the surprise election of Donald Trump as the next U.S. president, beyond noting that currency markets had seen “significant” volatility. It left unchanged its Y 2017 forecasts for US and world economic growth.

“More data over the coming months will provide further insight to allow a more detailed review of the US economic situation, particularly after the most recent elections,” OPEC said in the report.

The latest figures could complicate OPEC talks on how to share any productioncuts.

OPEC experts meet to discuss this on 25 November, on 28 November will meet officials from non-OPEC countries, OPEC Secretary General Mohammed Barkindo said Monday.

According to OPEC’s report, October’s Crude Oil supply boost mostly came from Libya, Nigeria and Iraq, members that have sought to be exempt from cuts due to conflict.

Iran, seeking an exemption as output was held back by Western sanctions, also pumped more.

OPEC uses 2 sets of figures to monitor its output figures provided by each country, and secondary sources which include industry media. This is a legacy of old disputes over how much countries were really pumping.

Iran told OPEC it produced 3.92-M BPD of Crude Oil in October, while the secondary sources put output at 3.69-M BPD. From Iran’s POV, joining the OPEC supply cut deal from the higher figure would be more favorable.

OPEC issued a revised report Friday to add Iraq’s figure.

Baghdad, which has questioned the accuracy of the secondary-source numbers, told OPEC its October output was steady at 4.77-M BPD, that is 210,000-M BPD more than the secondary sources estimate.

OPEC’s report is the latest to show output is hitting new high. The October figure is the highest since Y 2008, according to a review of past OPEC reports.

In the report, OPEC trimmed its forecast of non-OPEC supply this year, although supply growth in Y 2017 is put at 230,000 BPD, little changed from last month.

With demand for OPEC Crude Oil in Y 2017 expected to average 32.69-M BPD, the report indicates there will now be an average surplus of 950,000 BPD if OPEC keeps output steady. Last month’s report pointed to an 800,000 BPD surplus.

The Y 2017 surplus implied by the IEA in its latest report last Thursday is closer to 500,000 BPD.

HeffX-LTN Analysis for USO: Overall Short Intermediate Long
Bearish (-0.29) Bearish (-0.45) Bearish (-0.40) Neutral (-0.03
HeffX-LTN Analysis for OIL: Overall Short Intermediate Long
Neutral (-0.20) Bearish (-0.47) Bearish (-0.27) Neutral (0.14)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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