Oil remains below $45 amid growing concern over USA supply glut

Marco Green
June 19, 2017

Oil traded near the lowest level in seven months as rising United States supplies cast doubt on the pace of a global supply glut-reduction.

NIGERIA's Brent crude price may increase by between $2 and $3 per barrel in the coming weeks, on the back of stable demand and low volatilities, a report by the global oil research firm S&P Global Platts, has predicted.

Speaking last week before Russian lawmakers, Central Bank Gov. Elvira Nabiullina said the economy is "very close" to its target of reducing inflation from 7 percent to as low as 3 percent, but the overall situation is "volatile".

If correct, that could keep a lid on oil and energy prices as a glut of supply grows despite the efforts of countries in the OPEC cartel and allies like Russian Federation to limit production.

Opec and other exporters such as Russian Federation have agreed to keep production nearly 1.8 million barrels per day (bpd) below the levels pumped at the end of previous year and not to increase output until the end of the first quarter of 2018.

In the latest sign of a crude glut, aging supertankers are being used to store unsold oil off Singapore and Malaysia. A Wall Street Journal survey estimated that U.S. crude oil inventories could have fallen by 2.6 MMbbls for the same period.

The bulk of new oil entering the market will come from US shale fields, who are all taking advantage of higher oil prices that makes it more lucrative to proceed with new oil rigs and investing in shale fields. Most analysts surveyed by Bloomberg had forecast a decline.

That is "really confirming the fact from last week that demand is a lot lower", said Tariq Zahir, managing member of Tyche Capital Advisors. At the same time, there has been an unexpected build in gasoline stocks. "That doesn't happen at this time of year". 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. Motor-fuel stockpiles expanded by 2.1 million barrels last week, the Energy Information Administration reported. EIA expects a small inventory build in 2018.

Output from Libya surged by more than 178,000 bpd to 730,000 bpd as the country's rival factions moved toward reconciliation, and supplies disrupted throughout years of conflict remained on line. "If we get to July. and nothing's changed, you could see it break $40", he said.

Other reports by Click Lancashire

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