Are OPEC And Its Allies Producing Too Much Oil?

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In the USA, crude stockpiles added 9.88 million barrels last week, the American Petroleum Institute was said to report.

The institute reported a drawdown of 2.10 million barrels in the oil inventories for the previous week.

"While geopolitical factors raise the risk that Saudi Arabia backtracks on its supply commitments to offset Iranian sanctions, we do not expect production cuts given the resulting loss of market share to United States shale and other oil producers", JP Morgan said in a note on Monday, as carried by CNBC.

Brent crude oil, the global benchmark, has lost about $10 a barrel since hitting a four-year high of $86.74 on October 3, on signs of ample supply even as U.S. sanctions on Iran aimed at cutting the Opec member's oil exports loom.

After a sizeable drop yesterday, crude prices stabilized today with WTI gaining 39 cents to $66.82/bbl and Brent for December settlement falling 27 cents to $76.17/bbl.

EIA estimated that US crude oil production last week was 10.9 million barrels per day, the same from the previous week.

The oil market continues to gradually slide down amid allegations of Saudi Arabia's readiness to quickly increase production.

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Saudi Arabia has 1.3 million bpd of spare capacity, said Falih, adding that UAE has assured they have over 200,000 bpd remaining.

"We dropped precipitously on the idea global demand is going to slow", said Gene McGillian, vice president of market research at Tradition Energy.

"We export as much as two barrels for any barrel that disappeared from Iran recently".

New US sanctions, targeting Iran's oil sector and banking, are to go into effect on November 4.

On oil prices pressure Saudi promises of the Minister of energy to increase supplies on the world market, said analyst Nordea Denis Davydov.

Earlier this month, Saudi Crown Prince Muhammad bin Salman said the kingdom was fulfilling promises to the United States to make up a shortfall in world oil supplies resulting from the loss of Iranian production under U.S. sanctions.

"I believe that our (oil) exports could continue at a suitable level and..." The 10-year average level of production was 2.3 million barrels per day. Also, OPEC's September output was 850,000 barrel per day above where it was in May, not including Congo, while Russia's production in September is up 390,000 barrel per day from May, according to Platts survey data. EIA data also showed USA crude inventories rose 6.3 Mmbbl.