On Friday it said the reduction had helped to lift oil prices by about 15% in the past three months. Despite a post hurricane surge in production the United States oil rig count fell by 5 rigs to 744 rigs according to Baker Hughes. Under the agreement, Oman will cut almost 5 per cent of its production, a reduction of 45,000 barrels per day.
Advertisement
That alone will cut into demand growth, never mind the drag that rising oil prices, and their inflationary impact, may have on economic prospects.
The Opec meeting last week provided a few positive headlines but fell short of any actual announcements.
The agreement was then extended for an additional nine months until March 2018.
There were no caps imposed on Libya or Nigeria but they pledged to contribute to supply cuts when their production stabilises. Yet, because reality is setting in and the EIA had to twice reduce their outlook for demand because the shale output did not grow as expected.
The Opec’s supply compliance rate was up to 82 per cent in August from 75 per cent during July.
He emphasised that Nigeria, as one of the older members of OPEC, would continue to work for the good of the Organisation and its member countries, respecting whatever agreements and resolutions collectively made.
Portfolio managers also increased their already large net long position in US gasoline by a further 3 million barrels to 71 million, the highest since April 2014.
Top oil executives gathered at the S&P Global Platts APPEC conference in Singapore said strong oil demand this year was accelerating market rebalancing and helping inventory drawdowns.
“If we break above $60, I believe that we will hold above it for the rest of the year”, Tamas Varga, an analyst at PVM Oil Associates Ltd, said by phone from London.
But even for crude, the balance of risks is starting to shift, with positioning and prices suggesting oil is no longer oversold, even if prices do not appear excessive yet. The U.S. government on Wednesday announced a build of 4.6 million barrels for the week ended September 15.
According to his forecasts, Brent oil may return to the level of $55 per barrel already on Thursday. USA storm damage and strengthening economies may have finally dislodged sentiment away from resignation to a future of low oil prices. In Europe, ARA products were down 3.8 per cent last week and are at par with year-ago levels at 40.34 million barrels.
John Kemp at Reuters points out that USA distillate stocks fell to just 139 million barrels by the end of last week, which was 25 million barrels below 2016 and 5 million barrels below the long-term seasonal average.
Oil prices have been volatile and sometimes stuck in a range this year as OPEC attempts to clear the world oil glut were often met with skepticism by traders and investors.
Global benchmark Brent crude rose 77 cents, or 1.4 percent, to $57.63 by 9:21 a.m. ET. We are seeing strong growth in global demand and global macroeconomic indicators are being revised upwards. “The Utorogu Non-Associated Gas 11 plant was also completed recently adding 150 mmscfd; the Oredo 2 gas plant also adds 100 mmscfd and the successful re-entry of Odidi which led to an addition of 40 mmscfd of gas indeed represents a major achievement for the company and a step forward to achieving NPDC’s aspiration to become a serious global player in the E & P industry”, Mr. Matashi averred.
“Brent could go above $60 a barrel in the fourth quarter”, but may not be sustainable, said Giovanni Staunovo, a commodity analyst at UBS Group AG. The shale boom “flash in the pan” will flare out and the world will return to “normal”, with incremental demand to be met from the core Opec countries and Russian Federation once more. WTI prices sustaining above $50 will further support technical buying.
Advertisement
Against U.S. crude futures, it is trading at its largest premium in over two years, having doubled in just over a month. The broader trend looks range bound between Rs 2,700-3,450 levels.
