Most oil players losing confidence in the market, IEA says

Brent daily chart

Brent daily chart

Every country is in need of it, but few have the resources necessary to procure it themselves.

A similarly-minded Bob Dudley, chief executive officer of BP, reiterated the familiar criticism that markets must stop taking into account data on a weekly basis, and that the harsh reality is inventory levels globally "are so high", discouraging him from any position other than crude prices remaining more or less where they are now.

As members of the Organisation of Petroleum Exporting Countries, OPEC, prepare for the joint ministerial monitoring committee meeting in Russia, Nigeria on Wednesday expressed commitment to support all resolutions to stabilize the worldwide oil market.

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Oil prices flipped to gains Thursday with growing momentum behind the International Energy Agency's prediction of higher global demand. No assumption could have been more wrong than this.

The "hefty" declines in oil stockpiles projected for the second half of this year may be tempered if Libya is able to sustain its output recovery and Nigeria makes further advances, the agency said. However, lasting price movements could be limited over the next year because some US tight oil producers have used financial instruments to guarantee a price above $50/b for their expected production.

Even as the Energy Information Administration (EIA) reported that USA oil production had risen, most of that gain was from Alaska and the Gulf of Mexico. For all of 2017, total demand is now forecast at 98 million barrels a day, up by 1.4 million barrels a day compared to 2016.

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US drillers went back to adding rigs last week: plus 7, marking a 24th week of increases out of the last 25 and bringing the total count up to 763, the most since April 2015. Furthermore, what is most surprising is that Mercuria is rumoured to be courting Argentinian shale oil and gas producer Andes Energia, revealing a new long-term approach to the oil market in the region. This was driven by higher production even in those countries subject to an OPEC-led deal to cut production. In fact, the whole infrastructure of refineries and plants has been built to process heavier crude extracted in Saudi Arabia and Canada. OPEC and the American shale oil industry were regarded as being in direct competition. "The global economy itself benefits from stable oil markets".

The average external break-even for oil and gas exporters was only $20 to $30 per barrel before the bull market in crude, which saw Brent hit an all-time high of nearly $147.50 a barrel in mid-2008. The IEA seemed to ignore improvement from non-OPEC oil producers that joined in the pact that saw their compliance improve. This situation can be detrimental for established firms under upgrade, such as Saudi Aramco and its anxiously awaited IPO.

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