The US and Brent crude oil price benchmarks both rose modestly on July 24 as market participants evaluated a statement from a committee meeting of major producers in St. Petersburg, Russia, regarding production-cut targets.
The Organization of Petroleum Exporting Countries and some non-OPEC producers, including Russia, previously agreed to extend production-cut targets of 1.8 million b/d through the end of first-quarter 2018. But ample world oil supplies remain, and oil prices have not recovered as fast as some analysts had anticipated.
“These meetings were aimed at saving face and diverting the market’s attention away from Iraq’s poor compliance, shale’s resilience, and Libya’s and Nigeria’s markedly higher output,” said a research note by Barclays Research.
A Joint Ministerial Monitoring Committee (JMMC) and Joint Technical Committee (JTC) met in St. Petersburg to review oil production levels. Barclays said comments made by participants after the committee meetings are unlikely to sway oil prices during 2017-18 (OGJ Online, July 24, 2017).
Yet, Barclays still expects “a constructive market balance in the remainder of this year.” Barclays forecast Brent prices will average $50-55/bbl yet this year through 2018.
“What has not changed is that Saudi Arabia and Russia are not wavering from their commitment to the deal. The ineffectiveness of the policy in the first half of 2017 means, in our view, that they will do whatever it takes to show an effect in the second half of this year,” Barclays said.
Libya and Nigeria, OPEC members exempted from the production-cut agreement, acknowledged limited upside for production. “Yet market participants assign little likelihood that these countries are ready to participate in a broader OPEC, non-OPEC effort to balance the oil market. In other words, the damage has been done, and their current output level handicaps the efficacy of the OPEC, non-OPEC deal,” Barclays said.
The September light, sweet crude contract on NYMEX gained 57¢ on July 24 to settle at $46.34/bbl. The October contract also added 56¢ to close at $46.51/bbl.
The NYMEX natural gas price for August decreased 7¢ to a rounded $2.90/MMbtu. The Henry Hub cash gas price was $2.96/MMbtu, down 7¢.
Heating oil for August edged up less than a cent to remain at a rounded $1.52/gal. Reformulated gasoline stock for oxygenate blending for August nudged down less than 1¢ to remain at a rounded $1.56/gal.
The Brent crude contract for September on London’s ICE gained 54¢ to $48.60/bbl. The October contract was up 51¢ to $48.82/bbl.
The August gas oil contract fell $1.25 to $451.50/tonne. OPEC’s basket of crudes on July 24 was $46.01/bbl, down 99¢.