Could the API's Crude Oil Inventories Push Crude Prices Higher?

Oct 12, 2017, 00:27
Could the API's Crude Oil Inventories Push Crude Prices Higher?

Rising supply from the US and from other producers outside of the deal, as well as recovery of production in exempt OPEC members Libya and Nigeria, have been offsetting much of the OPEC/non-OPEC production cuts.

"It is no secret to anyone that OPEC and US shale producers have been battling each other in a production war since the dramatic decline in the price of oil has begun three years ago; however, each party would benefit from a stronger price of oil in the medium to longer term", said Ahmad. "Between the first half and second half this year, demand growth is nearly about 2 million barrels (per day), which is very robust", he said. Oil has found support from the deal but, trading below $57 a barrel on Wednesday, crude is still half its mid-2014 level.

When the futures market shows near-dated oil contracts trading above those further out, a pricing structure known as backwardation emerges, which indicates that traders believe supply is becoming restricted and encourages anyone storing up physical oil to release their stocks.

The figures mean Opec has complied 98 per cent with the cutback pledge, according to a Reuters calculation, up from 83 per cent initially reported in August as the September rise was led by Nigeria and Libya which are exempt from the cut.

For 2017, it forecast a rise of 380,000 bpd to 9.24 million bpd.

Increasing demand for oil will be matched by added supplies, but Opec's forecasts for the balance of supply and demand foresee a greater reliance on the cartel's output.

In an unconventional plea to USA shale drillers, OPEC's Secretary General Mohammad Barkindo urged North American producers on Tuesday to share the responsibility for drawing down the global oil overhang.

"Oil prices are expected to remain at $50-55/b in the next year", Opec said.

The Organization of the Petroleum Exporting Countries, Russia and some other non-member producers are cutting their collective output by about 1.8 million barrels per day (bpd) until next March to run down a price-sapping supply glut. The main United States contract, WTI, was at $51.30.