Increased oil production in the United States is hampering efforts to balance out market supply and demand, the Organisation for Petroleum Exporting Countries (OPEC) said on Tuesday.
While a “rebalancing of the market” was “underway,” it was “at a slower pace than originally anticipated,” OPEC wrote in its latest monthly oil market report.
This was “due to changes in fundamentals, especially the shift in US supply from a forecast contraction to positive growth,” the report said.
And it was being observed, “despite the very high overall conformity to the production adjustments in the first four months of 2017,” OPEC added.
Back in November, OPEC members agreed to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to reduce the glut of oil supplies on the shore up prices.
Non-cartel producers led by Russia partially matched the cuts.
The measures helped stabilise oil prices at the beginning of the year, with the international benchmark Brent crude sticking above $50 per barrel.
And at a meeting at the end of May, both OPEC and non-OPEC countries decided to roll over the output cuts for a further nine months.
Nevertheless, increased output in the US was getting in the way of the rebalancing process, OPEC complained.
Brent has dropped back below $50 since the OPEC meeting.
American producers have benefitted from the OPEC and non-OPEC efforts to push prices higher.
Shale producers, in particular, can react quickly to market developments, because they are less capital intensive than other ventures.
And they have racked up production as prices rise.
The bulk of the upward adjustment in non-OPEC oil supply since December “has come from the US,” OPEC said.
And that was skewing the market.
“The revisions to non-OPEC supply growth have been much greater than the upward adjustments to world oil demand growth, accentuating the imbalance in the market,” it said.
Looking at anticipated growth in global oil demand this year, OPEC reiterated its forecast of 1.27 million barrels per day (bpd).
With regard to the global economic outlook for 2017, stronger-than-anticipated momentum since the beginning of the year led to an upwards revision in the growth forecast to 3.4 percent following growth of 3.1 percent in 2016, OPEC said.