US oil production seen thwarting OPEC effort to boost prices

Late last month, OPEC said it would extend an 1.8 million-barrel-a-day cut to oil output by nine months, though March 2018, after the November deal failed to fully clear a global oversupply in oil, which has been keeping prices relatively low.

Crude prices have fall by more than 10 percent since late May, pulled down by an supply glut that persists despite a move led by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by nearly 1.8 million barrels per day (bpd) until the end of the first quarter of 2018.

The Paris-based IEA said production outside the Organizationof the Petroleum Exporting Countries would grow twice as quicklyin 2018 as it will do this year, when OPEC and 11 partnernations have restrained output.

OPEC, and some non-OPEC producers led by Russian Federation, agreed last month to extend supply curbs for nine months through to the end of March 2018.

Market sentiment was already weak before the EIA readings, after both the global oil cartel and the top energy watchdog, the International Energy Agency, noted that the global supply growth rate continues to outpace demand and will do so until next year at least.

According to Wednesday data from the EIA, crude-oil stockpiles decreased by 1.7 million barrels in the week ended June 9, falling short of expectations for a 2.6 million barrel drop from analysts and traders surveyed by the Wall Street Journal.

Both crude oil benchmarks have lost all the gains made at the end of a year ago after the oil cartel agreed with other big producers to cut output in an effort to prop up prices.

It's a "battle between sheikhs and shale", Dudley said, referring to the frantic efforts by the major oil producing nations of the world in the middle east to prop up crude oil prices, which are under relentless pressure from rising shale oil and gas production in the United States and record stockpiles. That was despite the ongoing output cuts by the Organization of the Petroleum Exporting Countries and other producers including Russian Federation.

OPEC now expects USA production to increase by 800,000 bpd in 2017. Despite "robust demand", Fesharaki told CNBC that "there is too much oil on the market". The goal is to reduce crude inventories to their five-year average.

"The market is in trouble", said Tamas Varga, analyst at London brokerage PVM Oil Associates.

WTI was trading up 0.8% at $46.45 per barrel at 3:11pm EST-more than $1.50 per barrel lower than a week ago-with Brent trading at $48.74, compared to $50.05 per barrel last week.

Efforts to combat the oil glut have not been helped by figures this week that showed Opec as a whole increased production in May because of higher output by Nigeria and Libya, which are not covered by the recent cuts deal.

Saudi Arabia's oil exports are expected to fall below 7 million barrels per day this summer, according to industry sources familiar with the matter, and Russian oil exports were seen as broadly flat in the third quarter.

Overall 2017 average annual demand growth was left unchanged at 1.27 million b/d.

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