Can Opec weather the storm over oil?

Ivan Schwartz
July 17, 2017

Brent crude futures, the global benchmark for oil prices, were at $49.08 per barrel at 0126 GMT, up 17 cents, or 0.35 per cent, from their last close.

"The US will later this year or early next year reach the highest production in its history", he told the congress.

U.S. crude rose more than 5.2% for the week while Brent rose more than 4.7%.

The slight rises extended strong gains from last week.

Six ministers from OPEC and non-OPEC nations, including Kuwait, Venezuela, Algeria, Saudi Arabia, Russia and Oman, will meet on July 24 in St. Petersburg, Russia, to discuss the current situation in the oil market. US West Texas Intermediate crude futures settled up 46 cents, or 1%, at $46.54 per barrel, Reuters reported.

"I think the big driver is inventory numbers", said Stewart Glickman, the head of energy research at CFRA Research in New York, "We've finally broken below 500 million barrels; I feel like it's a psychological barrier".

In Asia, China's refinery activity indicates strong demand.

According to CNBC, China imported 8.55 million barrels per day (bpd) of oil in the first six months of this year, up 13.8 percent on the same period in 2016, making it the world's biggest crude importer ahead of the United States.

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Still, oil inventories in industrialised nations remain high despite a modest drop in May. OECD stocks are still 266 million barrels above the five-year average, the IEA said.

The report also said oil demand grew in Iran, Iraq, UAE and Qatar, with transportation fuels, notably jet fuel and gasoline, dominating the increase in all countries.

"This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement".

Analysts at Commerzbank said the subsequent reduction in the developed world's oil stocks was likely to continue "so long OPEC does not significantly increase its output any further".

Crude prices are still around levels in late November last year, when a group of oil producers including Russian Federation and Organization of the Petroleum Exporting Countries (OPEC) pledged to withhold around 1.8 million barrels per day (bpd) of output between January this year and March 2018 to tighten the market.

"All this talk about putting a production cap on Libya and Nigeria is premature", Al-Ghais said.

"There are some encouraging signs that things are getting better for crude, last weeks healthy stock draws in the USA and the rig count slowly but surely not increasing at the rates they were earlier on in the year, but fundamentally we are still in an oversupplied market", said Matt Stanley, fuel broker with Freight Investor Services (FIS).

And due to the abundant supply, the price of oil now stands at less than US$50 a barrel, around a third of the level 10 years ago.

Other reports by GizPress

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