International Energy Agency (IEA), which monitors energy market for the OECD countries, released its report earlier this week and the report is not a good one for the oil bulls. While IEA cited many reasons for the downbeat expectations for the oil price, the statistics strongly suggest that the production in the United States is the greatest threat to oil price recovery. The report suggests that the massive inventory overhang that shadows the oil market might last longer than anticipated. Inventories have actually gone up, despite OPEC/N-OPEC production cuts for five months already. It cited rising U.S. shale oil production, weak gasoline demand, weaker demand from China and India as major concerns with regard to oil price recovery.

However, data suggest that increased U.S. production is the single biggest threat. Figures from IEA suggests that this year alone, the U.S. production would rise by 920,000 barrels per day and by another 780,000 barrels per day in 2018. The production in the U.S. is already up by 890,000 barrels per day from its bottom around last July. This increase by the end of 2017, would completely nullify the production cuts from the OPEC if production rises in Libya and Nigeria too. It is hardly a wonder that the price of oil has declined almost 15 percent since the OPEC/N-OPEC agreement in May to extend production cuts.