Oil Prices in Doldrums Yet Again; What’s the Outlook?

Meanwhile, the International Energy Agency on Thursday cut its forecast for an increase in global oil demand next year on a dimmer economic outlook, warning that the “massive” stock overhang is keeping a lid on crude oil prices.

Global benchmark Brent crude futures were down 13 cents at $44.85 per barrel at 1216 GMT.

Crude-oil prices dropped further Thursday, weighed down by the continuous growth in USA crude stocks and the record-high output by Saudi Arabia, both signs that the world is very much oversupplied still.

Top exporter Saudi Arabia boosted its oil output to a record high in July of 10.67 million barrels-per-day (bpd), it told the Organization of the Petroleum Exporting Countries.

At about 8:50 IST, US benchmark West Texas Intermediate for September delivery was down 19 cents to United States dollars 41.52 a barrel while North Sea Brent for October delivery was also down 17 cents to USD 43.88. But its policy of pursuing market share showed mixed results past year as it lost ground in export markets both globally and within OPEC itself despite becoming the world’s top crude producer. Reflecting upon this, Mr. Cardillo added: “The rebalancing of the market is in progress…as demand remains strong and lower production from non-OPEC members take hold”. Refinery-use rate fell 1.1% in the same week.

OPEC produced just over 33.1 million barrels of oil per day in July, up 46,400 barrels compared to June, the oil cartel said in a new report released Wednesday. This is up from the earlier expectations of the energy agency of 8.61 million and 8.2 million barrels per day in 2016 and 2017, respectively.

Saudi-based industry sources said in April output would rise to meet summer power demand, not to flood the market.

The low oil price environment commenced two years back, sinking prices near $60 per barrel last June peaking from $115 per barrel in mid-2014.

Traders said that a proposed meeting to be held by oil producers in Algeria from 26 to 28 September this year may not result in market tightening. Adam Sieminski, administrator at the energy agency stated: “After a steep drop over the past year in USA oil production, a recent uptick in the number of rigs drilling for oil is expected to contribute to more steady monthly oil output starting this fall”.

Moreover, without the full backing of Saudi Arabia and its closest allies, the deal would never come to fruition, said Tim Evans, a Citi Futures analyst. But the kingdom had a last-minute change of heart when Iran refused to curb its output. As a percentage of total OPEC exports a year ago, Saudi oil exports accounted for 30.39%, down from 30.86% of total OPEC exports in 2014, the figures show. ICE gasoil for September contract was down $2.50 or 0.6% to $383.75 a metric ton.