Most oil players losing confidence in the market, IEA says

14 July, 2017, 00:43 | Author: Delbert Rhodes
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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", the Paris-based IEA said.

Oil market investors are losing confidence over OPEC's effort to offset the glut of supplies, though the impact could be hitting US producers, the IEA said.

A similarly-minded Bob Dudley, chief executive officer of BP, reiterated the familiar criticism that markets must stop taking into account data on a weekly basis, and that the harsh reality is inventory levels globally "are so high", discouraging him from any position other than crude prices remaining more or less where they are now.

The EIA also reported that gasoline supply fell by 1.6 million barrels as demand for gas surged again last week and cut the deficit year over year by half.

There were concerns that compliance to production quotas would fade within individual members which would make it more hard to hold discipline and risk a gradual net increase in production levels.

In its latest report, the IEA stated that global oil supply rose 720,000 bpd in June with increased production in OPEC and non-OPEC countries.

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While the oil production benchmark in the budget was 2.2 million barrels per day (mbpd), Nigeria is now producing about 1.7mbpd of oil without condensate, and was still within the price band of $42.50 per barrel which the budget has. The build in total US petroleum inventories for the week ending June 2 was the largest for any week since 2008. Goldman Sachs warned on Tuesday that crude oil could plunge below $40 a barrel "soon" if OPEC fails to take further action. These reports suggest at least partial consensus that global oil demand is growing faster than production.

By the IEA's estimate, it's not just three members undermining OPEC's efforts.

On Wednesday, July 12, 2017, the EIA (U.S. Energy Information Administration) released its weekly petroleum status report.

Anyway, no further oil output cuts are expected for the July meeting of the ministerial committee set up to monitor compliance with the OPEC-non-OPEC deal. USA oil production was up by 59,000 barrels a day to almost 9.4 million barrels a day, but it was not all shale. If Libya and Nigeria do not experience any more disruptions due to violence or political instability, it is very likely that these countries will have no choice but to comply with the production cut. For all of 2017, total demand is now forecast at 98 million barrels a day, up by 1.4 million barrels a day compared to 2016.

The number of rigs in operation has more than doubled from May 2016. We do not expect any drastic changes next week: bunker prices may continue swinging with no firm trend.

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