Science

Oil Slides on Supply Glut

Oil Slides on Supply Glut

Oil has traded below $50 a barrel amid speculation that rising U.S. supply will counter an extension of production curbs by Opec and its partners, including non-Opec member Russian Federation. However, the supply cut only had a marginal effect on reducing the supply and oil prices remained practically depressed.

The main reasons for the fuel price adjustments in June 2017 are the strengthening of the Rand against the US Dollar during the period under review and the average decrease in the prices of petroleum products in the worldwide markets in line with the lower crude oil prices.

Gasoline futures fell 3.04 cents, or 1.93%, to $1.5467 a gallon.

Lower crude oil prices have a negative impact on oil and gas producers' earnings like Noble Energy (NBL), Sanchez Energy (SN), and Goodrich Petroleum (GDP).

Iran is the only OPEC member with room for growth under a current deal to stem production in an effort to balance the market.

"Oil prices have been generally falling ever since that Opec meeting on May 25".




The narrowing of the Brent-WTI differential was also supported by the significant drawdown in USA crude inventories. The 1.8 million barrel a day reduction was enacted to drive the price of oil up and make the industry more profitable to OPEC producers.

A campaign by leading Arab nations, including Saudi Arabia, Egypt and the United Arab Emirates, to isolate Qatar is disrupting trade, including oil.

Some traders, however, said worries about the impact on oil supplies from the diplomatic spat had been overblown.

The rise was driven by sharp output recoveries in Libya and Nigeria, both of which are exempt from the organization's production cut agreement. The 3.3M-barrel build in U.S. commercial oil inventories marked the first increase in 10 weeks and raised concerns over the effectiveness of the OPEC production cut agreement. The deal to reduce oil production sounds halfhearted since it moves one-step forward and two steps backwards.

Since OPEC announced the extension of production cuts, the market has continued to react bearishly with respect to the oil price. Many analysts are concerned that increased production in the United States and other countries is maintaining high levels of global supplies. OPEC must find ways to drain the deluge of oil in storage if it is serious about forcing an increase in global oil prices.


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