Oil prices stabilize after supply declined last month

Oil prices stabilize after supply declined last month

In November a year ago, when OPEC members agreed to cut production for the first time since the Great Recession, it was welcomed with great optimism and oil price jumped more than 20 percent, from $45 per barrel to as high as $55 per barrel (WTI).

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

While the research shows some forced adjustment to the era of lower oil prices, it also hints at more pain to come by pouring cold water over the optimism surrounding oil producers' attempts to diversify their economies.

OPEC members have considered new output caps on Nigeria and Libya.

Losses picked up after the IEA released its monthly oil report (http://www.marketwatch.com/story/iea-raises-oil-demand-forecast-says-output-increased-in-june-2017-07-13), saying global oil supply in June rose by 720,000 barrels a day to 97.46 million a day, boosted by increased output from the Organization of the Petroleum Exporting Countries and non-OPEC producers such as the U.S. Global oil inventories are forecast to be relatively unchanged in the second half of 2017 before returning to average inventory builds of 0.2 million b/d in 2018. The build in total USA petroleum inventories for the week ending June 2 was the largest for any week since 2008.

In total, global oil demand was projected to reach 98 million bpd this year.

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As oil price weakens, so does high yield, and vice versa, but as Warren Estey, head of America's natural resources at Deutsche Bank sustained, increased volatility means less room for errors when markets become more efficient, even if the eventual profits can be sky high.

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

Kachikwu also said he would not attend a meeting between OPEC and non-OPEC nations on July 24 in Russian Federation, because he would be hosting a meeting of African oil producers in Abuja on the same day.

On the bullish side, the market is being supported by EIA remarks from earlier in the week calling for USA crude oil production to rise by less than previously forecast next year due to a lower price outlook. However, recently both countries have ramped up production, feared to offset the cuts implemented by the rest of the group. As of 2016, the US average daily export rate was just 520,000 bpd, although in May, the average daily was 1.02 million barrels.

US drillers went back to adding rigs last week: plus 7, marking a 24th week of increases out of the last 25 and bringing the total count up to 763, the most since April 2015.

He further said Nigeria, though committed to the deal, would have to get to a predictive level of comfort to voluntarily join in the production cut.

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