There are “lingering concerns” that US and European refiners may reduce processing rates as profits fade amid a continuing “overhang” of crude and refined fuels, the Organization of Petroleum Exporting Countries said in its monthly report.
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Prices hit two-week highs Monday, with Brent reaching $45.71 a barrel and WTI striking $43.39 after the Organization of the Petroleum Exporting Countries said the cartel would next month hold a meeting on the sidelines of the International Energy Forum in Algeria.
OPEC MEETS: Amid little market-moving news, oil was in focus after the Organization of the Petroleum Exporting Countries announced Monday that oil ministers of the 14-nation organization will meet next month, well ahead of their previously scheduled November meeting.
The country’s oil production stood at 0.86 million barrels per day in 2015, according to the EIA. Futures on Tuesday fell 25 cents to settle at $42.77.
Benchmark U.S. crude was up 39 cents, or 0.9 percent, to $43.41 per barrel in NY, adding to the $1.22 gains made on Monday.
The EIA also reported that USA gasoline stocks fell 2.8 million barrels last week in the second-biggest weekly draw for gasoline since mid-April. The Energy Information Administration is expected to report Wednesday that supplies dropped by 1.5 million barrels. “Oil prices are likely to remain at the lower end of the recent trading range over the next couple of months”.
“In any case, many oil forecasters, including the EIA, expect the crude market to be under-supplied in the second half of next year”.
This expectation of higher crude oil demand in third and fourth quarters of 2016, coupled with decrease in availability, is leading the analysts to conclude that the current bear market is only temporary and oil price will increase during later part of 2016.
An early rally in USA crude oil prices evaporated.
“The talk about a production freeze is all talk and no action”, said Andy Lipow, president of Lipow Oil Associates in Houston. “And while we saw a draw in gasoline we are still at record levels in the product markets”.
The national average retail pump price for gasoline, however, witnessed a must smaller decline this week: just 9/10ths of a penny to $2.13 per gallon, which is 47.9 cents per gallon cheaper compared to the same week in 2015, EIA said. NRG Energy fell 61 cents, or 4.5 percent, to $12.91, while Southwestern Energy shed 57 cents, or 4.1 percent, to $13.55.
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He said that these meetings may contribute to stabilization of oil prices.
