Saturday, 22 July, 2017

Venezuela Oil Price Below $40 for a 2nd Week

UBS Gordon Sees Oil Trading in $40 to $60 Range UBS Gordon Sees Oil Trading in $40 to $60 Range
Preston Stone | 04 July, 2017, 00:14

Despite a decrease of 2 rigs, the increasing numbers of operating rigs, as well as increasing production, have been raising concerns that the US shale oil producers which were able to cut their production cost dramatically over the past years are now a low-priced global competitor and would continue to undermine the OPEC agreement to cut supplies.

A 28 cent increase was witnessed in U.S. West Texas Intermediate to sell at $44.01 a barrel.

Data from Baker Hughes released on Friday showed that the number of active USA rigs drilling for oil declined by two to 756 rigs this week.

In our article last week, we discussed how the global supply glut in oil, coupled with weak demand, has put the oil market back in bear territory.

While the survey found that high compliance by Saudi Arabia and Kuwait helped keep OPEC's adherence with its supply curbs at a historically high 92 percent in June, extra production from Nigeria and Libya boosted June output by an average of 32.57 million bpd, far above the overall production target.

"Crude oil price will likely be locked in the US$45-US$55 per barrel (bbl) band range". WTI crude fell 14 percent to $46.04 per barrel in 1H2017, while Brent crude declined 16 percent to $48.77 per barrel over the same period.

Forty-seven percent of the 15 oil market experts say there is more downside risk, but 40 percent say there should not be. Copper bottomed out at a low of $5,462.50 a ton on May 8, below Goldman's three-month target of $6,200. The day before the holiday, AAA reports that regular unleaded averages a mere $2.23 per gallon nationwide: The lowest price for early July since 2005.

"The decline signals that USA oil supply struggles to remain profitable between $40 and $45 a barrel", said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia.

On the inventory side, United States oil inventories fell by 0.8 per cent MoM in June to 509.2 million but were 3.1 per cent higher YoY. "This creates risks that the normalisation in inventories will not be achieved by the time the OPEC cut ends next March".

OPEC and other major oil producers such as Russia, Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan reached an agreement in December 2016 to remove 1.8 million barrels a day from the market. The investment bank cited higher-than-expected production from Nigeria, Libya and a swift rebound in US shale output.

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