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Published: Fri, October 14, 2016
Economy | By Melissa Porter

Oil prices fall on higher OPEC output, rise in US crude stocks

Oil prices fall on higher OPEC output, rise in US crude stocks

Yesterday, the American Petroleum Institute reported a 2.7 million build, the first increase in USA supplies in six weeks.

But OPEC Secretary-General, Mohammed Barkindo, said yesterday, that talks with Russian Federation about limiting crude oil production have been very constructive. OPEC supply quotas will be decided at the group's official gathering late November in Vienna. EIA offered a mixed forecast for the price for crude oil, raising its prediction for Brent by $1 per barrel for 2016 to $43 per barrel for the full year average, but lowering its 2017 estimate by $1 per barrel to $51 per barrel.

Nymex reformulated gasoline blendstock-the benchmark gasoline contract-fell 0.1% to $1.46 a gallon. Total volume traded was 45 percent below the 100-day average.

John Kilduff, partner at NY energy hedge fund Again Capital, said that while more crude builds were likely in the coming weeks due to depressed refinery runs, "the declines in distillate fuels, of late, are starting to add up".

Russian Federation was the first non-OPEC member to welcome the deal, agreeing to also limit its average daily production of just under 11 million barrels.

OPEC still has "work to do come up with the detail that will convince the market", Alex Beard, head of oil at Glencore, said.

The policy refers to an global market in which countries do not restrict imports from, or exports to, other countries. This immediately weighed on worldwide oil prices, as it came amid a temporary pause to the news flow about OPEC and Russia's freeze plans. He also called for "the need to look at Chinese oil demand per capita relative to other markets" before declaring that "the era of Chinese oil demand growth is over".

OPEC continued to boost supply, increasing output by 160,000 barrels per day and reaching a record high of 33.64 million barrels per day due to Iraqi pumping and Libya's reopening of its oil terminals. "The present stock overhang may continue to weigh negatively well into the future, with a worsening impact on producers, consumers and the industry", it said. Tim Gould, head of the Energy Supply Division of International Energy Agency (IEA) told the session that he anticipates "that non-OPEC supply will contract this year by around 900,000 barrels a day", and also "the US production will fall this year by around half a million barrels a day in total", moves that are expected to reduce the oversupply.

Prices have probably advanced far enough given the possibility of increased USA output.

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