Oil Producers Pump Record Volumes Ahead Of Possible Production Freeze

US crude tumbled 1.92% to $45.14 a barrel, after gaining 0.9% on Monday. US data due Wednesday are forecast to show the country’s oil inventories rose by 4 million barrels last week, which may fuel concerns over a glut. OPEC also revised its projections for rival supplies in 2017, predicting an increase in output from outside the group instead of a decline, the latest sign that the global surplus is persisting. Major producers are due to meet in Algiers later this month. A previous attempt at a production cap in April was derailed by Iran, which refused to join in talks as it ramps up output after the lifting in January of years of nuclear-linked sanctions. Iran briefly triggered a spike in prices late last month when it announced it would participate in the meeting.

Recent data has shown that Iran is reaching its pre-embargo production levels faster than expected. Venezuela is trying desperately to increase its production, Russia is pump oil at record levels and Iraq continues to steadily bump up its output. This combined with a surge in US production over the past months might make a production freeze an idle gesture at the upcoming meeting. It is very unlikely that any of these countries will agree to roll back or lower than current levels. Brent oil kept pace with WTI and is trading at 47.33.

OPEC said Monday that oil production by countries outside the exporters’ cartel was now expected to rise in 2017, revising its previous expectations of a drop. In its monthly report, the Organization of the Petroleum Exporting Countries said Kazakhstan, Norway and Britain were now all expected to produce more next year than forecast earlier. This means production outside the cartel is expected to rise by 200,000 barrels per day, against previous projections of a 150,000 b/d decline. Global oil demand is projected to continue growing. Demand is also expected to rise in 2017, it added. “The main growth centers for next year continue to be India, China and the US,” the report said.

Producers have been hurt by plunging oil prices for around two years due to a stubborn supply glut. Crude prices have been slashed from around $100 in mid-2014 to 13-year lows of below $30 at the start of this year.

In the US Crude inventories fell 14.5 million barrels last week, the biggest decline since January 1999, an Energy Information Administration report showed Thursday. Imports tumbled 21 per cent as Tropical Storm Hermine moved into the Gulf of Mexico, disrupting shipping and output. Oil extended losses as equities slipped and the dollar rallied. Crude imports dropped to 7.07 million barrels a day last week, the biggest decline since September 2012, EIA said. Refineries increased operating rates by 0.9 percentage points to 93.7 per cent of capacity, the highest since November 2015. Plants usually begin to cut back on operations in August as the peak-demand driving season comes to an end.

Oil prices fell in early trade on Tuesday on concerns over increased drilling in the United States and as investors took profits after oil prices rose close to 1 percent in the previous session. Chinese data printed better than expected but did little to reverse oils losses but did limit the declines.