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Traffic backs up at the toll plaza to the San Francisco-Oakland Bay Bridge on July 2, 2013/AFP

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Oil demand outlook trimmed, OPEC squeezed

The global supply of oil rose by 575,000 bd per day in July from the figure for June to 91.8 mbd, and by 785,000 bd on a 12-month basis.

But the monthly increase was accounted for by the rise of supplies from outside OPEC.

OPEC oil production fell by 165,000 bd to 30.41 bd “due to supply disruptions in Libya where civil unrest continues to derail exports”, even though Saudi Arabia had increased its supplies by 150,000 bd to a 12 month high of 9.8 mbd.

But OPEC also raised production of natural gas liquids, which are akin to crude oil, by 175,000 bd.

The IEA also reported that output by Iraq fell below 3.0 mbd for the first time for five months and exports were expected to plunge by about 500,000 bd from September owing to work on infrastruture at southern ports. Meanwhile attacks on the “key” northern pipeline were sharply reducing exports from Kirkuk.

The agency also spotlighted violence, unrest or tension in Algeria, Nigeria, Egypt and Syria.

These factors largely explained a rise in the price of benchmark West Texas Intermediate to a 16 month high level in July.

“Many commentators, recognising in the new North American supply a defining feature of tomorrow’s market, are questioning its implications for the future of OPEC,” the IEA wrote.

OPEC would have to cut its supplies under pressure from shale oil “unless falling prices curb shale oil production first.”

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But at the moment, OPEC’s main problem is “in bringing production to market”.

OPEC’s production last month “was down 1.1 mbd on the year” mainly owing to “domestic developments in some member countries.”

The comment was made just two months before the 40th anniversary of the Yom Kippur war when several Arab countries, as part of their attack on Israel, made OPEC a household name by engineering the first of two oil-price shocks in the 1970s.

Those shocks were defining events in how economies evolved in the decades since.

One consequence was the creation of the IEA as the energy and oil strategic reserve monitoring arm of the Organisation for Economic Cooperation and Development (OECD) which groups leading democracies.

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