OPEC Reports Record Oil Output as 2017 Surplus Fears Grow

OPEC and IEA believe the oil glut will last through 2017

It may be even more difficult to implement the deal agreed upon by members of the Organization of the Petroleum Exporting Countries (OPEC) now that the cartel has reported an increase in oil production in October, to a record high of 33.64 million barrels per day (bpd), up 240,000 bpd from September.

According to OPEC's latest monthly report, the increased output came mostly from Libya, Nigeria, and Iraq - all of whom have refused to go along with the proposed cuts - and represents the highest level of production since at least 2008, according to a Reuters review of past OPEC data.

The report also revealed that with demand expected to average 32.69 million bpd, surplus next year will reach 950,000 bpd if members' output remains steady; OPEC last month put the figure at 800,000 bpd.

The International Energy Agency (IEA) stated that given these huge numbers, "This means that OPEC must agree to significant cuts in Vienna to turn its Algiers commitment into reality.

"Unfortunately for those seeking higher prices, an analysis of the other components provides little comfort," and the IEA noted that production next year will further increase in Russia (by 190,000 bpd), Brazil (by 280,000 bpd), Canada (by 225,000 bpd), and Kazakhstan (by 160,000 bpd).

The IEA went on to remark that "If no agreement is reached on November 30, then the market will remain in surplus throughout the year, and if this persists in 2017 there must be some risk of prices falling back."

The agency however chose not to predict how the election of Donald Trump as the next U.S. president will affect the market in 2017, stating that it will wait and see if his rhetoric such as that against Iran will translate into action.

As the bad news caused futures on Friday to drop to the lowest level in almost two months, John Kilduff, founding partner of Again Capital, said, "Oil is falling because of OPEC's self-inflicted wounds.

"OPEC members are confessing to large increases in production that might make achieving their Algiers deal an impossibility."

But Helima Croft, head of global commodity strategy for RBC Capital Markets, strongly disagrees: calling her firm "The lone OPEC optimist," she told CNBC that "If Saudi backs off, then it's no deal, but as long as Saudi wants this deal done and they're driving the bus, we think it gets done."

She added, "And we think that deal will push us into the low $50s."

But should the deal fail, Gary Ross, executive chairman at PIRA Energy Group, believes prices could fall as low as $35/bbl.

It's hardly the first time the respected RBC analyst has defended Saudi Arabia's intentions to curb production: in August, after his kingdom refused to freeze or reduce output in the June OPEC talks, she credited energy minister Khalid al-Falih for striking a conciliatory tone and predicted he will follow through with tangible commitments.