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Oil Prices Slip as OPEC Points to Bigger 2017 Oil Glut | ASHARQ AL-AWSAT English Archive 2005 -2017
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The OPEC flag and the OPEC logo are seen before a news conference in Vienna, Austria, October 24, 2016. REUTERS/Leonhard Foeger

Oil prices took a plunge on Friday reflecting the oversaturated markets, with an unlikely chance of change so long Organization of the Petroleum Exporting Countries (OPEC) sustain high production rates.

International Brent crude futures traded at $45.13 per barrel at 1345 GMT, down 70 cents from their last close.

U.S. West Texas Intermediate (WTI) futures were down by 84 cents, or almost 2 percent, at $43.82 per barrel.

Crude futures have wiped out gains made since the end of September when OPEC said it would agree to cut oil production to prop up persistently low prices.

Investors have been hesitant whether a deal to cut or freeze oil output levels could be reached at an OPEC meeting on Nov. 30 and then implemented. Meanwhile, an increasing amount of data has underscored a global skew towards oversupply.

OPEC reported on Friday an increase in its output to another record high, pointing to an even larger surplus on the market next year. It said pumped 33.64 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, up 240,000 bpd from September, OPEC said in a monthly report.

That means the cartel, affected by geopolitical disagreements amongst some of its 14 member states, would have to cut up to a million bpd if it makes good on its promise to reduce its output to between 32.50 million bpd and 33.0 million bpd.

According to OPEC’s report, October’s 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.

Meanwhile, the International Energy Agency (IEA) said the supply overhang could run into a third year in 2017, should OPEC fail to act.

“Oil markets are increasingly reflecting growing consensus that the persistent oversupply seen throughout 2016 will carry on into 2017,” analysts at JBC Energy wrote.

“We would actually go a step further, as while 2016 has seen a significant improvement from 2015 with easing oversupplies, 2017 will be worse again barring massive outages or OPEC action.”

In its monthly oil market report, the IEA said global supply rose by 800,000 bpd in October to 97.8 million bpd, led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan.

Nigeria is working out new oil and gas policies to attract more private investors and boost crude production by 500,000 bpd by 2020, state firm NNPC said on Thursday.

The IEA kept its demand growth forecast for 2016 at 1.2 million bpd and expects consumption to increase at the same pace next year, having slowed from a five-year peak of 1.8 million bpd in 2015. OPEC had a similar global demand growth forecast for next year of 1.15 million bpd.

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

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

With demand for OPEC crude in 2017 expected to average 32.69 million 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 2017 surplus implied by the IEA in its latest report on Thursday is closer to 500,000 bpd.