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News : Global Economy Last Updated: Aug 27, 2014 - 10:38 PM

Oil prices dip despite geopolitical tensions; US production at 27-year high
By Michael Hennigan, Finfacts founder and editor
Aug 14, 2014 - 3:59 AM

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Despite high geopolitical tensions in Eastern Europe and the Middle East, oil prices have dipped this week in response to robust supply and a weak world economy whileUS production is at the highest level since 1987.

On Wednesday the US Energy Information Administration (EIA) reported a rise of 1.4m barrels in oil supplies for the week ended Aug. 8.

Brent, the world's price benchmark, for September settlement gained $1.26 to close at $104.28 a barrel on the London-based ICE Futures Europe exchange. The contract touched $102.37, the lowest intraday level since July 1, 2013.

Bloomberg News reported that WTI (West Texas Intermediate) for September delivery rose 22 cents to settle at $97.59 a barrel on the New York Mercantile Exchange. Volumes were 12% higher than the 100-day average. The US benchmark crude traded at a $6.69 discount to Brent, up from $5.65 yesterday.

The WTI is down by $8.74 in 12 months.

The EIA reported on Tuesday that "US total crude oil production averaged an estimated 8.5 million barrels per day (bbl/d) in July, the highest monthly level of production since April 1987. US total crude oil production, which averaged 7.5 million bbl/d in 2013, is expected to average 8.5 million bbl/d in 2014 and 9.3 million bbl/d in 2015."

Also on Tuesday, the Paris-based International Energy Agency (IEA) -- the energy watchdog for 28 industrialised countries including Ireland, in its Oil Market Report (OMR) for August lowered its 2014 global oil demand growth forecast by 1.0m barrels per day (mb/d) on lower-than-expected deliveries in the second quarter and the International Monetary Fund's weaker outlook for economic growth. But as the economy improves in 2015, demand is set to accelerate by 1.3 mb/d in 2015.

OPEC crude oil supply rose by 300,000 barrels per day (300 kb/d) to 30.44 mb/d in July, a five-month high, as a boost from Saudi Arabia to 10 mb/d and a tentative recovery in Libyan output more than made up for declines in Iraq, Iran and Nigeria. The "call on OPEC crude and stock change" averages around 30.8 mb/d for the fourth quarter, just like in the third, the OMR informed subscribers.

The global oil supply increased 230 kb/d in July, to 93.0 mb/d, with higher OPEC output countering slightly lower non-OPEC supply. Compared with July 2013, global supplies rose 840 kb/d, as a 1.2 mb/d increase in non-OPEC supplies more than offset a 360 kb/d decline in OPEC output.

OECD industry stocks posted their sixth consecutive monthly build in June, rising 13.8 mb to stand at 2 671 mb at the end of the month, their highest level since September 2013. Inventories' deficit to the five-year average narrowed to 42.1 mb from 52.0 mb at the end of May. The second-quarter stock build of 88 mb was the largest quarterly build since the third quarter of 2006.

The IEA said global refinery activity saw diverging trends in June. A counter-seasonal fall in OECD throughputs contrasted with record highs in key non-OECD countries. The OMR estimated second-quarter global refinery runs at 76.5 mb/d, 1.3 mb/d more than a year earlier and 0.2 mb/d higher than in the previous OMR. Projections for the third quarter remain unchanged at 77.8 mb/d.

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