- Oil prices under pressure stemming from a possible increase in OPEC’s supply
- WTI prices are rebounding slightly from an important support
- US oil stocks have already achieved their the 5Y range
Oil prices have been under pressure of late mainly on the back of uncertainty related to OPEC’s supply. The Cartel increased its out-turn 300 kbpd last month, whereas there are some revelations that July’s production could rise 150 kbpd. If so, it could be the highest level of output since December 2016. That move, along with higher output coming from US shale, has confounded market participants whether the so-called balanced oil market is still attainable.
Even as OPEC’s output lowered in first two quarters of this year, an overall level of stocks actually picked up. On that account there are some doubts if an ongoing rise in production neutralizes an earlier decline in stockpiles seen in the end of the last year. Source: Bloomberg, XTB
Furthermore, Saudi Arabia’s oil minister Falih said earlier today that there has been no discussion on deeper cuts of production at today’s meeting of OPEC/non-OPEC joint ministerial monitoring committee in Russia. One of the most interesting issues scheduled to be discussed today were Libya and Nigeria in terms of their meaningful pick-up of output. We got commentaries that further talks regarding those two countries and their participation in the deal are to be continued. Al-Falih suggested as well that an oil demand in the world is healthy and it could increase 1.5 mbpd this year. He added that a return of global oil stocks toward a 5Y moving average is only a matter of time.
Besides, oil ministers from Russia and Kuwait pointed out that the deal’s compliance holds to 100% which could help oil prices to some extent. Nonetheless, current environment surrounding the oil market remains dubious, hence one could say that bears seem to have greater chances to prevail in the nearest future.
WTI prices are rebounding from an upward trend line which is being supported by a 38.2% retracement of a recent pullback. As for now, there is no huge likelihood that a resistance placed at around $47 will be broken. However, there is no doubt that shrinking US inventories is a encouraging sign.