OPEC and U.S. shale drillers are on collision course: Kemp

OPEC and U.S. shale drillers are on collision course: Kemp

The IEA said on Wednesday it expected growth in non-OPEC supply to be higher next year than growth in overall global demand.

"Our first outlook for 2018 makes sobering reading for those producers looking to restrain supply", said the report.

Brent has dropped back below $50 since the OPEC meeting.

Both benchmarks have given up all of the gains made since OPEC agreed to cut output to prop up prices late November.

If U.S. shale production continues to grow rapidly, OPEC will probably return to defending its market share in 2018, even if it means accepting lower oil prices. OPEC said oil inventories in industrialized countries dropped in April and would extend a decline in the rest of the year, but a recovery in production in the USA was slowing efforts to get rid of excess supply.

Canada's oil-sands will increase production rapidly in the next three years, ranking only behind USA shale as the biggest contributor to global supply growth.

The news underscored the market's ongoing struggles with weak gasoline demand in the United States, the world's top consumer of the motor fuel, and rising production, especially from USA shale drillers.

While this would not affect global inventories, restricting the amount of oil coming into the United States should theoretically bring down inventories in the much-watched market, if it weren't for Iraq's increased oil exports to the US.

However, oil stocks are near record highs in many regions across the world as traders anticipate further fall in prices.

And the U.S. Energy Information Administration has raised its prediction for U.S. output growth in 2017 to 460,000 bpd from a predicted decline of 80,000 bpd in December. Even so, output from USA shale and other non-OPEC sources will essentially capture the entire gain. Stockpiles of oil worldwide are large and growing, an indicator of persistent oversupply, according to data from the International Energy Agency (IEA) cited by the Wall Street Journal. Prices slid $1.72, or 3.5 percent, to $47 Wednesday.

The dollar .DXY rose to its highest in more than two weeks, adding to the pressure on oil, as solid readings on the US economy helped strengthen the case for the Federal Reserve to continue tightening monetary policy this year.

Oil held losses below $45 a barrel after sliding to the lowest in seven months as USA gasoline supplies unexpectedly rose for a second week.

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