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Daily Trends Now


Analysts Warn: Much Deeper OPEC Cuts Are Needed

Analysts Warn: Much Deeper OPEC Cuts Are Needed

Two OPEC members not included in the deal also have recently seen increases in production: Libya's output has reached almost 800,000 b/d, a level not seen since 2014, and Nigeria has announced the lifting of force majeure for Forcados exports, potentially making available to the market more than 200,00 b/d.

Global oil output will expand faster than worldwide demand for oil next year, primarily as United States producers rack up production, and that could hamper exporters' efforts to prop up prices, the IEA said on Wednesday (Jun 14).

Prices then came under pressure following the American Petroleum Institute (API) data with a headline build of 2.75 million barrels.

US crude futures fell by 1% to trade at $45.97 a barrel after the report was released.

Oil fell on Wednesday after reports showed global supply was rising and U.S. crude inventories were still increasing, raising concerns the market could stay oversupplied for longer than expected.

WTI light sweet crude oil was down 41 cents at $46.05 a barrel, back near its lows of the year.

The problem for the Saudis is that it appears fellow Opec members are not doing as much to help the cause of rebalancing oil markets and therefore boosting prices. "There is too much oil from the US, too much oil from Libya, too much oil from Nigeria", said Fereidun Fesharaki, founder and chairman of consulting group FGE, which focuses on oil and gas markets east of the Suez and in Europe and the U.S, reports CNBC.




The last time this happened, in mid-2014, preceded a massive selloff in oil that dropped Brent from $108 a barrel to about $47 a barrel in the span of five months.

"The rebalancing of the market is underway, but at a slower pace, given the changes in fundamentals since December, especially the shift in USA supply from an expected contraction to positive growth", OPEC said in the report.

Producers hedge by buying a variety of financial options to secure a minimum price for crude and safeguard future production.

Data on Wednesday showed USA consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months.

"As a result, oil inventories remain high, particularly in the US-a key factor behind persistent weakness in oil prices", pointed out a World Bank report on Global Economic Prospects.

"By some accounts this increase is a troubling threat to Opec compliance, but we note that it was driven by 352,000 bpd of additional supply from Libya and Nigeria", wrote Tim Evans, energy analyst at Citigroup.

Oil inventories across the world's most industrial nations rose in April by 18.6 million barrels to 3.045 billion barrels, thanks to higher refinery output and imports. They stand 292m barrels above the five-year average and are higher than when Opec chose to cut output, the IEA said.

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