Oil rises on hopes for China, Greece but demand worries weigh

The agency, which advises the world’s biggest economies on energy policy, said “something has to give” because the world oil market was unable to absorb the huge volumes of fuel now being produced.

In the first quarter of this year, combined profits for the likes of BP, Royal Dutch Shell, Exxon Mobil, Total and Eni from refining and trading represented 60% of total earnings, compared with 18% last year, according to Reuters calculations.

IEA’s forecast for non-OPEC supply is unchanged from its June report, at 58 million b/d, “as an upwards adjustment to US output growth in 2Q2015 is offset by expectations of lower supplies later on”.

“The market has no need to re-test the lows” of $42 reached in March, Paul Horsnell, head of commodities research at Standard Chartered Plc in London, said by e-mail Thursday. Not only that, but most oil companies only hedge their oil production out for a year or two.

Societe Generale stated that the possibility of a deal weighed a lot on recent oil prices during the recent months, and it will certainly persist for the next 2 weeks at minimum until a visible confidence return in China’s current financial markets are seen.

The global market will remain amply supplied into 2016, Total SA Chief Executive Officer Patrick Pouyanne said at a parliamentary commission in Paris Wednesday.

The resilience of United States shale oil production has impressed many traders. While the timeline for lifting sanctions remains unclear, it is estimated that Iran could add up to 800,000 barrels a day to the market within a year.

“We reiterate our fundamentally driven forecast for lower oil prices” Goldman concluded.

Despite the many obstacles, there are still 4 million barrels per day in production when under normal circumstance it would be 4.5 million to 5 million barrels a day.

The report says demand in 2016 will likely continue to wane. Generally speaking, the U.S. dollar and oil prices tend to move in opposite directions.

Oil inventories held by the 34-nation Organisation for Economic Co-operation and Development (OECD), whose members include the US, also reached a record high in May, the IEA said.

In a June note, Morgan Stanley’s Adam Longson noted that even with peak summer demand, there weren’t enough buyers for all the crude oil out there. Bloomberg report in May that the daily rate of oil supertankers surged to the highest level in seven years on a sudden rise in demand from producers.

Rigs counts show considerable variability (the standard deviation of the weekly change is 13 rigs) so the statistic is noisy and last week’s increase was not in itself significant.