OPEC spare capacity falls to lowest level since late 2016

OPEC spare capacity falls to lowest level since late 2016

The estimated growth in global demand has been reduced by 110,000 barrels per day for each of the two years.

Oil prices gave back early gains and turned lower on Friday after the International Energy Agency (IEA) deemed supply adequate and the outlook for demand weakening, sinking even as equities rebounded from a slump Thursday.

"The market absorbed some effects of sanctions on Iran and the oil prices are more likely to go up 120 to 130 US dollars per barrel, that require the export from Iran would go much lower, " said Richard Nephew, senior research scholar with Center on Global Energy Policy of Columbia University.

The International Energy Agency said in its monthly report that the world's spare oil production capacity was already down to only 2 percent of global demand, with further reductions likely to come. "The demand outlook is hurt right now because of the situation with the US and China in particular". Both global demand and supply are close to hitting 100 million barrels a day for the first time. As explained in the demand section of this Report, there is also an impact from methodological changes to Chinese estimates. "In the third quarter of 2018, OPEC members (other than Iran and Venezuela) increased crude oil production by more than the amount that crude oil production in Iran and Venezuela declined". OPEC, Russia and other U.S. shale producers had increased production since May, raising global oil output by 1.4 million barrels per day (bpd).

The prices are being driven up in part because crude oil inventories continue to rise, meaning there's a plentiful supply. The rapid increase in prices was more about perception of a supply shortage than real fundamentals, he said.

According to a report released by the American Petroleum Institute on Wednesday evening, USA crude inventories climbed by 9.7 million barrels to 410.7 million last week. This, combined with a massive USA stock sell-off and growing concerns that trade disputes will adversely impact oil have weighed on oil prices this week.

The amount available will nearly certainly be tested in the coming months as US sanctions take effect on Iran, which has already seen supplies fall to the lowest in more than two years, according to the report.

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