Oil hits six-week low as Opec fails to curb oversupply

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Demand for OPEC oil may not be enough to fully end cutbacks.

Crude prices have fallen more than 10% since late May, pulled down by heavy global oversupply that has persisted despite a move led by Opec to curb production. With the gain, Nigeria reclaimed the title of largest African producer in OPEC from Angola, where output fell by 54,000 bpd, the biggest drop among the 13 members in May.

The Paris-based IEA said production outside the Organization of the Petroleum Exporting Countries would grow twice as quickly in 2018 as it will do this year, when OPEC and 11 partner nations have restrained output.

"Crude oil is still struggling to rebound", said Olivier Jakob, strategist at Petromatrix, adding that OPEC's gradual approach to rebalancing was giving USA producers time to drill new wells that were undermining the impact of the group's cuts.

At 2:22 p.m. ET, the Toronto Stock Exchange's S&P/TSX composite index was down 160.94 points, or 1.05 per cent, to 15,218.61. Demand will surpass 100 million barrels a day for the first time in the fourth quarter of 2018.

Crude oil inventory concerns have lingered, despite OPEC's curtailment on member and non-member production to the tune of 1.8 million barrels per day, and despite Saudi Arabia's ratcheting down oil exports to the United States, and promise to ratchet down more, by 35 percent in July.

The analyst also said that the cartel should have "done more" at its meeting last month, and added that he thought it was in for a period of "perpetual [production] cuts".

A surprise build in U.S. gasoline inventories pressured oil prices on June 14, 2017.

The oil research firm noted that the considerable drop in Brent futures prices, soon after the OPEC's meeting in May 25, this year, was mainly caused by an extension of the production cuts, and high level of speculation in the market. That loss of market share was foretold by former Saudi Arabian Oil Minister Ali al-Naimi, who insisted, until his departure a year ago, the group should keep pumping to squeeze out its competitors.

"The outlook for oil hinges on the effectiveness of the OPEC cuts relative to the supply increases from US shale", said William O'Loughlin, analyst at Australia's Rivkin Securities.

"It was a very bearish report", said Commerzbank analyst Eugen Weinberg.

At the same time, overall global demand is expected to pick up by 1.4 million bpd to 99.3 million bpd next year, the IEA predicted. Production rose by 12,000 barrels a day to 9.33 million barrels per day.

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