Published: Thu, June 15, 2017
Finance | By Laverne Griffith

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The other overnight development catching investors' attention was a sharp fall in crude oil prices, following an unexpectedly large buildup in gasoline stocks, and the International Energy Agency (IEA) data projected a big increase in non-OPEC output in 2018.

The benchmarks, Brent crude oil LCOc1 was down by 45 cents a barrel and US crude CLc1 by 50 cents at $45.96.

"In 2018, we expect non-OPEC production to grow by 1.5million bpd which is slightly more than the expected increase inglobal demand".

This comes on top of OPEC's most recent production report revealing a almost 340,000 barrels per day increase in May output versus April.

That means an entrenched market glut that has kept a firm lid on oil prices is likely to persist, despite disciplined efforts by most OPEC producers to rein in their own output. The report came after market close, and had more than wiped out the modest gains made in Tuesday's session on the back of analyst expectations of a draw in stocks.

"They're making a lot of headlines about reducing supplies but that's also right in their seasonal pattern of lowering exports in July, August because of domestic needs", he said.

The increase in exports via tanker was also reflected in higher output by the group, which said in a report on Tuesday that it produced 32.14 million bpd in May, up 336,000 bpd from the prior month.

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It seems that oil inventories are particularly unpredictable as of late, with last week, the API and EIA reporting remarkably disparate figures in the amount of crude oil inventory movement-a 7.9-million-barrel discrepancy between the two that fanned the flames of an already shaky market.

Oil stocks are near record highs in some parts of the world, and producers outside the OPEC deal are increasing output.

BP analysts said that production outside the Middle East fell by 1.3 Mb/d, with the largest declines in the USA (-400,000 b/d), China (-310,000 b/d) and Nigeria (-280,000 b/d).

Opec's production curbs should succeed in reducing global oil inventories over the second half of the year, Spencer Dale, BP's chief economist, believes.

The IEA has revised its forecast upwards for United States oil production this year, and said Brazil and Canada were also expected "to make further gains".

The last time this happened, in mid-2014, preceded a massive selloff in oil that dropped Brent from $108 a barrel to about $47 a barrel in the span of five months.

With supplies plentiful, strong demand is needed to support the market, but there are signs of a slowdown.

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