Longs, or bets on rising prices, increased 0.1 percent, while net longs advanced 56 percent, the most since July 2010.
Advertisement
Iran is sending positive signals that it may support joint action to prop up the oil market, sources in OPEC and the oil industry said, potentially aiding efforts to revive a global deal on freezing production levels at talks next month.
An attempt to jointly freeze production levels earlier this year failed after Saudi Arabia backed out over Iran’s refusal to take part of the initiative, underscoring the difficulty for political rivals to forge consensus.
Production from Libya, Iraq and Nigeria, which had seen supply disruptions in recent months, is starting to recover and will weigh on oil prices, Damien Courvalin and Jeffrey Currie wrote in a note dated Monday.
This week, supplies at the storage facilities at Cushing increased by 417,000 barrels according to the API figures, against a more conservative expected 200,000-barrel build.
Members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers like Russian Federation are set to meet in September to discuss a freeze in output levels in order to rein in oversupply, but analysts said animosity between OPEC-members Saudi Arabia and Iran made a deal unlikely.
Analysts are saying that the downfall in prices has been a result of an overreacting market and not caused by changes in oil fundamentals.
Brent for October settlement lost as much as 66 cents, or 1.3 per cent, to $48.50 a barrel on the London-based ICE Futures Europe exchange, having slipped 3.4 per cent on Monday. And until a freeze is agreed and stuck to, expecting crude prices to rise and stabilize at $60 or $70 a barrel is probably wishful thinking. “A production freeze would also likely prove self-defeating if it succeeded in supporting oil prices further, with the USA oil rig count up 28% since May”.
Matt Smith of Clipper Data added that short covering partially behind last week’s surge had eased, taking upward pressure off prices. The restive southern swampland region has been rocked by attacks on oil and gas pipelines since the start of the year, reducing the OPEC member country’s output by 700 Mbbl/d, down to 56 MMbbl/d.
The EIA increased its domestic output forecast for 2017 to 8.31 million barrels a day from 8.2 million projected in July, according to its monthly Short-Term Energy Outlook released August 10.
Advertisement
Members of the Organization of the Petroleum Exporting Countries are due to meet informally in Algeria next month on the sidelines of the International Energy Forum which groups both producers and consumers. Should the disrupted production rebound in a sustained fashion, WTI crude oil prices will drop to $45 a barrel against the bank’s current $52.5 a barrel forecast.
