Saturday, 16 December, 2017

Oil hits six-week low as Opec fails to curb oversupply

Nellie Chapman | 20 June, 2017, 02:23

The International Energy Agency says it expects oil supplies next year to outpace demand, despite consumption hitting 100-million barrels per day for the first time.

Global benchmark Brent crude rose 0.83 per cent to trade at $47.31 a barrel while the price of the U.S. benchmark, West Texas Intermediate (WTI), was 0.63 per cent higher at $44.74 a barrel. Inventories were 292 million barrels higher than the average over the past five years, said the agency, which advises governments on energy trends.

This implies that crude oil price, which stood at $48.27 per barrel, last week, would increase to $51 per barrel or more, signalling a good omen for Nigeria, which depends on crude oil for its fiscal responsibilities. Commercial crude oil inventories also fell less than projected, highlighting weak demand even as the US enters its summer driving season, when many vacationers take to the roads.

Due to projections of lower oil productions, the EIA reports that the responsiveness of the United States to global oil production may ultimately mean a greater supply in the country for 2018. In May, OPEC decided along with Russian Federation and other non-members to extend production cuts that began in January until March 2018. Additionally, the IEA projects that non-OPEC nations collectively will expand their output by 700,000 B/D in 2017 and 1.5 million B/D in 2018, slightly more than the forecasted growth in global demand. "It's been two weeks in a row of surprising unleaded gasoline builds".

Oil prices on Friday bounced up off the year's lows as some producers reduced exports and US rig additions slowed, but the rebound was modest and crude posted its fourth weekly decline on persistent concerns about global oversupply.

The contract lost 27 cents to US$44.46 yesterday, the lowest since November 14.

Brent for August settlement fell 9 cents to $US46.91 a barrel on the London-based ICE Futures Europe exchange.

According to Wednesday data from the EIA, crude-oil stockpiles decreased by 1.7 million barrels in the week ended June 9, falling short of expectations for a 2.6 million barrel drop from analysts and traders surveyed by The Wall Street Journal. Brent traded at a premium of $2.35 to August WTI. Yet "in our view, we are going to continue to have fairly robust deficits over the next three quarters or so, which should drain quite a bit of inventory".