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Oil demand set to ease in 2017, non-OPEC countries seen increasing production: IEA report

The Sedco 714 oil platform, operated by Transocean Ltd., stands in the Port of Cromarty Firth in Cromarty, U.K.
Matthew Lloyd | Bloomberg | Getty Images
The Sedco 714 oil platform, operated by Transocean Ltd., stands in the Port of Cromarty Firth in Cromarty, U.K.

Demand growth for oil is expected to drop from 1.6 million barrels a day last year to 1.4 million barrels a day in 2017, the International Energy Agency said in a report on Wednesday, raising further problems for producers as they try to ramp up prices.

"Early indicators of 1Q17 (first quarter of 2017) demand support this, with slowdowns seen in January in Japan, Germany, Korea and India," the IEA said.

In terms of output, the IEA noted that member countries of the OPEC oil-producing cartel cut their production for the second month in a row. At the end of last year, they agreed to reduce production to ensure prices would go up. But non-OPEC countries, some of which have also signed the output freeze deal, could undermine the deal.

"In 2017 non-OPEC output is set to rise 0.4 million barrels a day to 58.1 million barrels a day," the IEA said.

On Wednesday, oil prices were trading higher, after hitting a three-month low earlier in the week. Data showed on Tuesday that oil inventories had risen despite the deal to cut supply.

OPEC said in its monthly report on Tuesday that its biggest producer, Saudi Arabia, had raised its output in February by 263,000 barrels per day to 10 million barrels per day.

The Saudi Arabian government was quick in reacting to the OPEC statement. Its energy ministry reiterated the country's commitment to "stabilizing the global oil market".

At the time of writing, Brent was trading 1.5 percent higher at $51.73 a barrel and WTI was up by 1.8 percent at $48.59 a barrel.

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