The statement by Minister of Energy and Industry and current Opec President H E Dr Mohammed bin Saleh Al Sada that Opec would discuss the possibilities of “oil production freeze” in September, along with a weak United States dollar after flat USA retail data, pushed oil to enjoy the best week since April 2016, KAMCO’s oil market monthly report for August noted. That happened in just 16 days. The session peak was $51.22, the highest since June 22.
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Global crude oil prices rose for the sixth consecutive session Thursday amid hopes of a production freeze, which could prompt the state-owned CPC Corp.
There appear to be three fundamental reasons for the rally.
Fuel oil inventories for July in the US were also down, falling by 1.8 mb to 38.3 mb. The second is the bigger-than-expected drawdown in US crude and gasoline stocks that has done a little to ease the oversupply in the world’s biggest oil consumer. And the third is the recent speculation about a potential output freeze deal by OPEC and Russian Federation.
The OPEC and other major producers from outside the OPEC have revived the talks surrounding a meeting in Algeria mid September.
As Saudi Arabia stood off the agreement after Iran’s refusal, many doubt that it won’t do the same this time round.
The market may be getting over-confident that a deal will be struck. Iranian Oil Minister Bijan Namdar Zanganeh hasn’t decided yet whether to participate in the talks in Algiers next month, a spokesman said on August 16.
Opec member Nigeria said on Thursday it did not think a production cut was likely, though its Oil Minister Emmanuel Ibe Kachikwu said the Algeria meeting could help shore up crude prices.
This means that it’s going to take longer for the global supply glut to fall. Its 2017, U.S. oil production forecast was also raised from 8.2 mb/d to 8.31 mb/d.
“The U.S. production factor has taken on a more bearish appearance as the oil rig counts have increased appreciably”, Ritterbusch said, ahead of another rise in weekly U.S. rig count reading expected at 1:00 p.m. EDT (1700 GMT) from industry firm Baker Hughes.
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This week, data from the US Energy Information Administration (IEA) showed that both crude and gasoline stocks had suffered their first decline in a month, pushing prices up. In the report, the EIA raised the production forecast for United States oil producers indicating a slower than expected decline in U.S. oil output as USA oil producers are proving more resilient to oil prices. This has not quite happened yet.
