Agreement on production cuts impacting Russia's oil export volumes

04 July, 2017, 00:13 | Author: Elaine Woods
  • UBS Gordon Sees Oil Trading in $40 to $60 Range

Analysts say OPEC is determined to re-balance global oil market amid a stubborn supply glut.

In the last few days, the market has grown more bullish after USA data on Wednesday showed oil-product inventories declined. He adds, "despite the recent oil price drop, prices are likely to rise in 2017, with more upside potential in 2018". "Oil price weakness has been triggered by weakness in the demand-side of the oil market, as seen in the May Caixin Chinese manufacturing PMI". Next year's average forecast is $2.52, pointing to another 92% growth. Libya, like Nigeria, is exempted from the cuts deal, though its oil production and exports remain vulnerable to disruptions by armed factions and restive workers. Long positions in WTI surged to an all-time high earlier in the year, giving companies the opportunity to hedge. The growing concern is that rising Non-Opec output, led by the U.S. is increasingly offsetting the reduced Opec production. Shale oil producers have intensified technological research and with generous incentives including hedges continued to give signals and threats that their production cost would soon have a breakeven to cripple conventional oil produced by OPEC.

Export opportunities to Asia and big USA summer driving demand - expected to hit a record this weekend - are seen as the primary drivers for a drawdown in stocks that have remained stubbornly above seasonal averages.

The drop in U.S. rig count and U.S. Energy Information Administration figures showing output fell by 24,000 barrels per day (bbl/d) on a monthly basis "sent out a short-term bullish message", he said. At 756 rigs, U.S. oil rigs have more than doubled from the same time past year and point to more increases in oil output. Historically, Venezuela's basket set its highest weekly average ever on July 18, 2008, when it hit $126.46 before economies around the world began crashing under the weight of expensive oil.

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"If frackers continue to push to 10 million barrels per day-oil will be in the low $30s by the winter", wrote Anthonzy Grisanti of GRZ Energy.

On Thursday, about 6 million barrels of North Sea Brent crude were being stored on ships, down from four-month highs of as many as 9 million last week, and trading sources said it seemed now refineries were starting to take in more cargoes. Russian oil pipeline exports in June stood at 4.131 million bpd, down from 4.518 million bpd in May. Since January 2017, shale production has started to edge up and is now nearly back near its peak.

Still, Goldman remains optimistic on oil. The price has risen every day since June 21, when a new year low of $42.53 was recorded.

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