July 21, 2017
Oil declined after tanker-tracker Petro-Logistics SA said OPEC’s supply in July will be the highest this year.
Futures fell as much as 0.5 percent in New York, erasing a weekly gain. Supply from OPEC members is set to exceed 33 million barrels a day this month, more than 600,000 barrels a day higher than the first-half average, according to Petro-Logistics. The data could reinforce skepticism about the effectiveness of the Organization of Petroleum Exporting Countries’ production cuts as officials from the group gather for meetings in St. Petersburg, Russia.
Oil remains in a bear market on concern that growing output in the U.S., Libya and Nigeria is offsetting other producers’ curbs, meaning stockpiles aren’t shrinking fast enough. The report from Petro-Logistics found that Saudi Arabia, the United Arab Emirates and Nigeria are behind the extra barrels. The latter is exempt from making cuts as it tries to recover from disruption due to theft, sabotage and attacks by rebels.
The findings of Petro-Logistics further weaken “the foundations under the output deal, which is what the market is also saying by sending prices lower,” said Jens Naervig Pedersen, analyst at Danske Bank A/S. “It puts pressure on OPEC before the meeting this weekend.”
West Texas Intermediate for September delivery was at $46.56 a barrel on the New York Mercantile Exchange, down 36 cents, at 8:39 a.m. local time. Total volume traded was 4 percent above the 100-day average. The August contract expired Thursday after losing 33 cents to $46.79.
See also: RBC sees uncertainty rising about OPEC deal on Ecuador exit, Nigeria
Brent for September settlement fell 0.8 percent to $48.90 a barrel on the London-based ICE Futures Europe exchange. The contract slipped 40 cents, or 0.8 percent, to $49.30 on Thursday. The global benchmark crude traded at a premium of $2.41 to WTI.
OPEC and its allies are working to pare global stockpiles relative to the five-year average. Saudi Arabia’s crude inventories have reached the lowest level since January 2012 as the world’s biggest oil exporter kept a lid on production and U.S. stockpiles have shown signs of decline. Still, the International Energy Agency said earlier this month that global supplies remain bloated.
Rising supply is a problem, both from within and outside the group. This week, OPEC member Ecuador said it would increase its production by year-end in order to raise revenue. This raises “uncertainty” about the deal, RBC said in a note.
At current production levels, OPEC’s curbs won’t achieve their stated aim of reducing inventories to average levels by the time they expire in April, according to Bloomberg calculations using IEA data.
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