OPEC’s plan to cut production and support prices is likely to be undone by increased output in the U.S., the International Energy Agency predicted Wednesday.
If correct, that could keep a lid on oil and energy prices as a glut of supply grows despite the efforts of countries in the OPEC cartel and allies like Russia to limit production.
The IEA, a Paris-based body that advises oil-consuming states on energy matters, said in its monthly oil report it expects production in non-OPEC states like the U.S. to grow 700,000 barrels daily this year. It predicts that output will grow even faster next year, by 1.5 million barrels daily, “which is slightly more than the expected increase in global demand.”
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“Our first outlook for 2018 makes sobering reading for those producers looking to restrain supply,” said the report.
OPEC and 10 other countries led by Russia agreed last week to extend for nine months, to March, a production cut of 1.8 million barrels a day initially agreed on in November. The move is meant to drain the market of excess supply.
The recovery in the price of oil from last year’s lows has, however, made it profitable once again for U.S. shale oil companies to ramp up production.
The U.S. benchmark for crude was down 56 cents to $45.90 a barrel after the report’s release.
The Associated Press contributed to this article.