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“There is an overhang of producible oil in the world,” Ed Morse, Citigroup’s global head of commodities research, said in a July 31 phone interview from Houston. “We will probably see more Iranian oil lifted or leaked while OPEC continues to produce more than is demanded. If China remains sluggish, oil could drop to the low $90s and even fall into the $80s.”

Going into Storage

OPEC produced 31.9 million barrels in the second quarter compared with projected demand for the group’s crude of 29.8 million, IEA data showed. OPEC hasn’t overproduced as much since 1998, when supply exceeded demand by 3.4 million barrels a day. Most of the excess oil is probably going into developing-nation storage sites where data is scarce, as only 15 percent is accounted for in the 28 Organization for Economic Cooperation and Development countries the Paris-based energy agency advises.

The flood of supply comes as the euro area struggles to contain a debt crisis now in its third year. Economic growth has decelerated for six quarters in China while the U.S., the world’s biggest oil consumer, has a jobless rate that hasn’t dropped below 8 percent for more than three years. U.S. oil consumption fell 1.1 percent last week, the first drop in four weeks, a report from the Energy Department showed yesterday.

OPEC lowered demand estimates for its oil this year and next. The group’s 12 members will need to supply 29.9 million barrels a day this year, 100,000 barrels a day less than in 2011, and 29.5 million barrels of crude a day in 2013, OPEC’s Vienna-based secretariat said today in its monthly report.