Oil price falls as EU, Asia resist USA pressure

Source U.S. Energy Information Administration Short Term Energy Outlook May 2018

As well as OPEC's voluntary cuts, a plunge in Venezuelan oil output due to economic crisis and the United States' departure from a nuclear deal with OPEC member Iran have supported prices.

Given the above issue, global price of oil hits a record low which was unprecedented in the recent years.

Those data added to a healthy picture of global oil production as producers pounce on higher prices.

Despite this, OPEC's latest report said producers were cutting more than required under the deal, while producers not party to the agreement, such as USA shale companies, were starting to face constraints on future output.

OPEC pointed strong growth in developed and emerging markets and forecasted increased demand in 2018 to 98.85 million barrels per day.

This estimated growth rate was revised higher by 25,000 barrels per day compared to last month's estimates.

The cartel sees non-OPEC supply in 2018 growing by 1.7M barrels Y/Y, almost 90% coming from the U.S. This means the bloc expects the market will be in deficit by about 0.6 million bpd this year.

Moody's said the non-oil sector, however, has accelerated only slightly.

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That could eventually sideline about 1 million barrels per day from an already-tight market.

A research note from Capital Economics on Monday said that OPEC is overestimating demand growth and underestimating non-OPEC supply growth.

The number of rigs drilling for oil in the US rose by 10 last week to 844 rigs, the highest in more than three years. "Oil has scope to appreciate this week on the back of OPEC output cuts, heightened geopolitical tensions, and optimism over stronger global oil demand".

"So far the impact on the global economy has been minor and negligible, but the build-up of potentially disruptive concerns has increased", OPEC noted in its monthly oil market report. "We still expect the impact on Iran's oil output to be fairly small, given that Tehran and the European Union have made a decision to stay in the deal", analysts said.

April say Saudi Arabia and Algeria increase output, but this was partially offset by lower production in Venezuela, Gabon and Nigeria, the cartel added. The rig count is a forward-looking indicator on production.

According to a report revealed by the Energy Information Administration, the prices were also supported by the first decline of the USA crude inventories. Oil reached $78.28 a barrel on Monday, the highest since November 2014, after the OPEC report was published.

"Finding new investment to fund crude oil development projects in Iran has been a challenge and the imposition of new U.S. sanctions is likely to cut demand for Iranian crude, thereby limiting the market for production from new developments".

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