Published: Wed, November 15, 2017
Markets | By Rosalie Gross

Oil steady, tempered by caution over rising U.S. output

Oil steady, tempered by caution over rising U.S. output

The effort, which started in January, is credited with pulling the price of oil back from the sub-$30 per barrel range last year to two-year highs in recent sessions.

Oil prices held largely steady on Tuesday as the prospect of further rises in United States output offset some of the optimism that OPEC-led production cuts would tighten the balance between crude supply and demand.

"Oil is already facing stiff competition from ever-cheaper and more environmentally friendly energy sources as traditional fossil fuel users switch to cleaner, low-carbon alternatives", IEA said in its World Energy Outlook 2018.

This sentiment comes in part on the back of rising United States oil output, which has grown by more than 14 percent since mid-2016 to a record 9.62 million barrels per day (bpd).

The IEA said oil production will be driven by continued growth in energy-hungry industries.

"The reality is that even after some modest reductions to growth, non-OPEC production will follow this year's 700,000 bpd growth with 1.4 million bpd of additional production in 2018 and next year's demand growth will struggle to match this", it's monthly report read.

The U.S. government said on Monday U.S. shale production in December would rise for a 12th consecutive month, increasing by 80,000 bpd.

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After an upbeat performance last week, oil prices edged lower for a second day Tuesday.

Oil prices have risen in recent months, after both Opec and non-Opec countries struck a landmark deal at the end of previous year to cut back production to combat a global oil glut.

"It's quite spectacular, because you're going to see the number of cars on the road globally double from 1 billion to 2 billion, thanks to electric vehicles and fuel economy standards", said Laura Cozzi, head of the Energy Demand Outlook division.

Saudi Crown Prince Mohammed bin Salman said in October that the deal was working and demand was moving closer to the level of supply, but extraordinary action was needed for further rebalancing.

"It is far too early to write the obituary of oil, as growth for trucks, petrochemicals, shipping and aviation keep pushing demand higher", said Birol.

Analysts also noted that oil prices were being pressured by a global commodities selloff, led by base metals like nickel and copper, due to weaker-than-expected economic data from China.

Between 2017 and 2040 the IEA estimates that more solar power capacity will be added globally each year than any other source of energy, with an annual average increase of almost 70 gigawatts.

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