OIL price, which dropped below Nigeria’s 2017 benchmark price of $44.50 per barrel, weekend, has leaped from $44.38 to $44.58 per barrel in the international market. Prices have trended downwards in the past two weeks as a result of increased shale oil supply by the United States.
The Organisation of Petroleum Exporting Countries, OPEC, disclosed in a statement that the price of OPEC basket of 14 crudes stood at $44.58 a barrel on Friday, compared with $44.38 the previous day. The OPEC Reference Basket of Crudes, ORB, is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).
However, the prices of Brent and WTI dropped from over $47 and $46 to $46.98 and $44.33 per barrel respectively. Oil prices were slightly pressured as the continued expansion in US Shale was seen as obstructing OPEC’s efforts to stabilise the saturated markets.
West Texas Intermediate, WTI, for July delivery, which expires Tuesday, was at $44.75 a barrel on the New York Mercantile Exchange, up one cent. Total volume traded was about 12 percent below the 100-day average. The contract gained 28 cents to $44.74 on Friday. Brent for August settlement advanced 6 cents to $47.43 a barrel on the London-based ICE Futures Europe exchange, after dropping 1.6 percent last week. The global benchmark crude traded at a premium of $2.45 to August WTI.
Both benchmarks are down some 13 percent since late May, when producers led by the OPEC extended a pledge to cut output by 1.8 million barrels per day (bpd) for an extra nine months. According to the Energy Information Administration, the data show U.S. drillers increased the rig count by six to 747 last week, the highest level since April 2015, according to Baker Hughes. American crude production has expanded to 9.33 million barrels a day.
A research analyst at Forex Times, FXTM, Lukman Otunuga, said: “A stabilizing US dollar complimented the downside with sellers sending prices towards $44.50. The tale of OPEC versus US Shale is starting to feel like an ongoing battle of attrition with the champion taking the spoils. “From a technical standpoint, WTI Crude remains in the bears’ territory on the daily charts and a break below $44 should entice sellers to target $43.”
Similarly, Commerzbank analyst Carsten Fritsch said: “steady rises in U.S. production, along with output increases in Libya and Nigeria, which are exempt from the OPEC cuts, were undermining the OPEC-led effort in the near term. There is no reason to be overly optimistic at the moment.”
Dr. Mohammed Barkindo, Secretary General of OPEC, indicated that the market would be driven by robust demand growth, decline in legacy fields, decline in investments and cooperation among OPEC and non-OPEC members.
He said: “If we look ahead, we see four key drivers at play in the market: robust oil demand growth, supported by an improving global economy; the natural decline in legacy fields; the impacts of investment cuts of roughly a trillion dollars over the past two years and the continued lag in sizeable investments in long-term projects, as opposed to shorter-term incremental investments; and the new dynamic of cooperation between OPEC and non-OPEC producers, led by Russia, to keep markets in balance.
“When these four factors are taken together, I can only conclude that the supplies coming from marginal barrels, including shale production, will not be sufficient to meet the future need for incremental capacity. The market balance is already pointing in that direction, and in my view, this trend will only strengthen in the coming two years.”
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