Oil prices dip as OPEC expects less demand for its crude

Energy Snapshot What Happened on July 3–7 2017

Evidence of increased oil supply and faltering quota compliance within OPEC have maintained downward pressure on oil prices despite evidence of increased demand. USA crude oil prices rose on July 12, 2017, due to the massive fall in nationwide crude oil inventories.

Prices drifted lower during Thursday's Asian session with buyers unable to make any impression. The prices are still been pressured by evidences of an ongoing fuel glut despite efforts led by OPEC to tighten the market by holding back production. According to the latest estimates, compliance declined to 78% for June from 95% in May.

The rebalancing of global oil markets has become less certain, with OPEC production rising and little evidence that bloated stockpiles are shrinking as expected, the International Energy Agency said. This is the most oil Libya had produced since April 2014.

Oil dipped on Thursday on persistent worries about oversupply, but strong Chinese imports and signs that US storage tanks are gradually being drained offered some support to prices. The IEA also forecast a rise in oil demand this year: it may grow by an average 1.3 million bpd, accelerating from the 900,000 bpd in the first quarter.

Crude inventories fell 7.6 million barrels in the week to July 7, to 495.35 million barrels. U.S. WTI futures were up 1.58 percent at 10:30 a.m. HK/SIN, trading at $45.75 per barrel.

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The IEA said the non-OPEC producers who volunteered to cut production were actually better at sticking with the deal in June.

US crude oil production patterns in the Lower 48 onshore basins continue to vary by region, and quickly evolving trends in this sector can affect both current prices and expectations for future prices. In fact, a major role in this story has been played by the United States, where improved techniques of hydraulic fracturing, or fracking, enabled oil companies to gain access to the biggest oil reserves in the world, according to George Friedman, a political geographer. We also expect to see upward revisions in EIA gas demand data that was under-reporting demand earlier in the year.

Even as the Energy Information Administration (EIA) reported that US oil production had risen, most of that gain was from Alaska and the Gulf of Mexico.

Many have also voicing out on requiring an output limit to Nigeria and Libya and without any kind of production restraint on either of them; oil prices only have a small chance of reaching the $50 level again. If Libya and Nigeria do not experience any more disruptions due to violence or political instability, it is very likely that these countries will have no choice but to comply with the production cut.

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