Crude oil prices drop from two-year high

. IEA expects decline of non-OPEC production next year

Barely 24 hours of hitting one-year high at  $53.73 a barrel, Brent crude oil fell by 42 cent to hit $52.72 a barrel yesterday while West Texas Intermediate (WTI) also fell from $52.51 to settle at $50.92 a barrel.
 
This is coming just at the International Energy Agency (IEA) expects non-OPEC supply to drop by 0.9 million barrels per day (mbpd) in 2016 before rebounding by 0.4 mbpd in 2017.
 
According to IEA in its Oil Market Report released on Tuesday, global oil supply rose by 0.6 mbpd in September, with non-OPEC up nearly 0.5 mbpd on higher Russian and Kazakh flows and OPEC at an all-time high.

“Weighed down by autumn maintenance, global refinery throughput in fourth quarter of 2016is expected to decline seasonally by 1.1 mbpd, up just 70 kbpd year on-year. Global throughput in 2016 is expected to grow y-o-y by just 220 kbpd, the lowest annual growth rate in more than a decade, excluding the last economic recession”, it added.
 
IEA stated that benchmark crude prices rose in September as market rebalancing continued and participants anticipated an OPEC supply cut.
   
The international watch dog stated that apart from setting a supply target of between 32.5 mbpd and 33 mbpd, other critical details – like individual country allocations, production baseline and implementation date – need to be finalised when OPEC meets on 30 November.
 
It noted that Iran, Libya and Nigeria – all aiming to raise output – are said to be exempt from cuts. “A significant rebound in supply from Libya and Nigeria and further growth from Iran would suggest that bigger cuts would have to be made by others, such as Saudi Arabia, to meet the new output target. Our estimate for September shows crude supply from the group’s 14 members climbing to 33.6 mbpd – an all-time high.  The extent of any cooperation from non-OPEC producers such as Russia is still to be determined”, it added.

IEA said the current price of oil has caused discomfort for all producers – even those with hefty financial reserves, such as Saudi Arabia. “For high-cost non-OPEC producers the pain has been especially acute. The impact of steep investment cuts made in 2015 is being felt now: nearly 0.9 mb/d has been lost since a year ago. The lower price environment has also forced companies big and small to cut costs and do more with less. As a result, non-OPEC supply is expected to return to growth next year,” it said.