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A worker walks through an oil production facility owned by Parsley Energy in the Permian Basin near Midland, Texas, August 23, 2018. 

Nick Oxford | Reuters 

The International Energy Agency (IEA) expects the U.S. to challenge Saudi Arabia‘s position as the world’s leading oil exporter, after briefly overtaking the OPEC kingpin to claim the number one spot earlier this year.

“Booming shale production has allowed the U.S. to close in on, and briefly overtake, Saudi Arabia as the world’s top oil exporter,” the IEA said in its closely-watched monthly report on Thursday.

“The installation of the necessary pipelines and terminals is continuing apace, which will ensure that the trend continues.”

The U.S. momentarily surpassed Saudi Arabia as the leading oil exporter in June, after crude exports surged above 3 million barrels per day (b/d), the IEA said Thursday. That lifted total exports of crude and products to nearly 9 million b/d.

At the same time, Saudi Arabia cut back on both crude and refined product exports.

The oil-rich kingdom reclaimed the top spot in July and August, as the U.S. was affected by hurricane disruptions. The ongoing trade dispute also made it difficult for U.S. shale shipments to find markets in recent months, the IEA said.

‘Energy dominance’

The Paris-based energy agency’s monthly report comes at a time when the U.S. is actively pursuing “energy dominance,” regardless of what happens to oil prices.

Speaking to CNBC in Abu Dhabi earlier this week, the U.S. deputy energy secretary said President Donald Trump “often talks about energy dominance.”

“The world often asks: what does that mean? It just simply means that we are going to produce as much energy as we can, as cleanly as we can and as affordably as we can.”

“And whatever happens to the world price of oil, whatever happens to the world price of whatever, electricity, it doesn’t really matter, then so be it,” Dan Brouillette said.

In the last decade, the U.S. has more than doubled oil production to 12.3 million barrels a day, making it the world’s largest oil producer.

It now appears set to flood the oil market with even more crude, putting downward pressure on prices at a time when the market is already struggling to cope with too much supply.

Oil prices

International benchmark Brent crude traded at $61.05 a barrel Thursday morning, up around 0.4%, while U.S. West Texas Intermediate (WTI) stood at $56.04, up more than 0.5%.

Brent futures have tumbled more than 18% from a peak reached in April, with WTI down over 15% over the same period.

The IEA said that, over the final three months of the year, the U.S. “is expected to see a further build out of export infrastructure that should allow for up to 4 million b/d in crude exports.”

“With production expanding strongly, the question is can sellers of U.S. crude price exports attractively enough to capture international markets?” the energy agency added.

Demand outlook unchanged

The IEA left its oil demand growth forecasts for oil demand growth unchanged at 1.1 million b/d for 2019, and 1.3 million b/d in 2020.

It based these projections on the assumption that there would be no further deterioration in the economic climate and in trade disputes.

Oil demand growth will be “significantly higher” helped by a comparatively low base in the second half of 2018, lower oil prices versus a year ago and additions to petrochemicals capacity, the IEA said.

On Wednesday, OPEC downwardly revised its forecast for oil demand growth for the second consecutive month.

The group, which consists of some of the world’s most powerful oil-producing nations, cut its forecast for global oil demand growth for the remainder of this year to 1.02 million b/d. That was down 80,000 b/d from its August estimate.

In 2020, OPEC said it sees world oil demand increasing by 1.08 million b/d. This marked a downward adjustment of 60,000 b/d from its previous month’s assessment.

OPEC attributed the downgrade to weaker-than-expected economic data in the first-half of the year and deteriorating growth projections for the remainder of 2019.

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Bank of Canada Governor Stephen Poloz to step down in June 2020

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Carolyn Wilkins, senior deputy governor of the Bank of Canada, left, and Stephen Poloz, governor of the Bank of Canada, leave the Bank of Canada building for a press conference in Ottawa, Ontario, Canada, on Wednesday, Oct. 24, 2018.

Justin Tang | Bloomberg | Getty Images

Bank of Canada Governor Stephen Poloz will step down when his mandate expires next June, the bank said on Friday, and the front-runner in the race to take his place could become the first woman to head the country’s central bank.

Many economists and market strategists surveyed by Reuters this week said Senior Deputy Governor Carolyn Wilkins could be his successor.

Poloz, who is in the final year of a seven-year term, will not seek a reappointment and a process to select the next governor has begun, the bank’s board of directors said in a statement.

The board of directors oversees the selection process of a new governor, but the finance minister and the prime minister have the final say.

Poloz said that during his tenure the bank had “created the conditions for steady economic growth, low unemployment, and inflation close to target through very challenging times,” according to the statement.

Unlike some of its global peers, Canada’s inflation rate is near the central bank’s 2% target. The Bank of Canada has held its overnight interest rate steady since October 2018, even as several of its counterparts, including the U.S. Federal Reserve, have eased.

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Kudlow says a trade deal with China is ‘close’ amid ‘intense’ talks

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Larry Kudlow, White House National Economic Council director, said the U.S. and China are “close” to a trade deal but that the administration was prepared to walk away if it did not get the terms they wanted.

“The president has said many times if the deal is no good, if the assurances with respects to preventing future thefts, if the enforcement procedure is no good he has said we will not go for it. We will walk away,” Kudlow said on CNBC’s “Squawk on the Street” on Friday. “The president has said that if we can not get the enforcement and the assurances, then we will not go forward.”

The two countries are in talks to finalize a so-called phase one trade deal as 15% tariffs on $165 billion in Chinese imports are set to kick in Dec. 15. Kudlow said the two sides are moving closer to a deal.

“The deal is close. It’s probably even closer than in mid-November,” Kudlow said. “Deputy level met again … The reality is constructive talks, almost daily talks. We are in fact close…There’s no arbitrary deadlines, but the fact remains December 15 is a very important date with respect to a no go or go on tariffs.”

Kudlow characterized the recent talks between the world’s two largest economies as “intense.”

“I say intense because this is a very important matter,” Kudlow said. “There’s so much at stakes here when you go through the various categories… We can’t afford, we must not permit any country, China or whoever, to willy nilly steal our breakthroughs in technology and advanced micro-processing related to 5G.”

Trump said on Thursday that trade talks with Beijing were going “very well.” He added that something could happen regarding those tariffs that are set to be imposed in less than 10 days, but added they are not discussing that yet.

The Wall Street Journal reported on Thursday the U.S. and China still haven’t reached a consensus on the amount of agriculture goods that China would buy.

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Oil on track for weekly gain as OPEC+ set to confirm supply cut

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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

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Oil prices fell on Friday, but were set for weekly gains ahead of the OPEC+ meeting which kicked off Friday in Vienna.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – a grouping known as OPEC+ – agreed on Thursday to more output cuts to avert oversupply as economic growth stagnates amid the U.S.-China trade war.

But OPEC stopped short of pledging action beyond March and analysts have questioned the impact of the latest curbs.

Brent futures were down 18 cents at $63.21, but are set to rise 1.5% on the week.

West Texas Intermediate oil futures fell 33 cents to $58.10 a barrel. They are set to rise nearly 6% on the week.

The cuts next year will expand the existing agreement by an extra 500,000 barrels per day (bpd) reduction in the first quarter next year, through tighter compliance and some adjustments. OPEC’s current agreement is a supply cut of 1.2 million bpd and the increased amount represents about 1.7% of global oil output.

“If we were to have an outcome of an extension of cuts with only the official quota of the OPEC+ group being reviewed lower (the 500,000 bpd), rather than actual production, then the change in supply policy would be cosmetic (given below target production in some countries, notably Saudi Arabia and Angola),” said Harry Tchilinguirian, global oil strategist at BNP Paribas.

OPEC is likely to shoulder 340,000 bpd in fresh cuts and non-OPEC producers an extra 160,000 bpd, one source said on Friday.

Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.

“North American shale supply will continue growing even in an environment with lower oil prices,” Rystad Energy said in a note.

Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range.

The sale was the world’s biggest initial public offering (IPO), beating Alibaba Group Holdings’ $25 billion listing in 2014, but fell short of a $2 trillion valuation for Aramco sought by Saudi Crown Prince Mohammed bin Salman.

Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.

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