Russian Federation surpasses Saudi Arabia in oil output in May

Brent Crude

However, the lack of progress from the first OPEC agreement to cut oil production has led the markets to question the OPEC's ability to send oil prices back up.

Oil pared gains after an industry report was said to show USA crude stockpiles unexpectedly rose last week. My take? The world is tantalisingly near a short-term bottom in crude oil prices.

Oil slid in NY as the market searches for more evidence that Organization of the Petroleum Exporting Countries's (Opec) cuts are working.

Opec's "secondary sources" data, revised to include all figures from all parties, showed the 11 members bound by the Nov 30 output agreement pumped 29.89 million barrels a day in June compared with 29.69 million in May, according to a person familiar with the matter.

Oil prices edged up this morning in choppy trading, with traders still unconvinced that a production cut by Opec nations, Russian Federation and other producers is enough to balance the market.

The EIA reported that domestic crude supplies fell (http://www.marketwatch.com/story/oil-hits-session-highs-as-eia-reports-a-third-straight-weekly-drop-in-us-crude-supplies-2017-07-19) by 4.7 million barrels for the week ended July 14.




Brent crude futures, the worldwide benchmark for oil prices, were at $48.55 a barrel at 1.30am GMT, up 13c, or 0.3%, from their last close. But the report also showed (http://ir.eia.gov/wpsr/overview.pdf) a rise of 32,000 barrels per day in total domestic crude output to 9.429 million barrels a day.

Hopes the price might consistently top $50 per barrel earlier this year were dashed when production cuts by Opec nations and Russian Federation were not sufficiently severe - and United States production bounced back to fill the gap.

An upward trend in global crude prices proves that OPEC's efforts to freeze output have been positive for the market.

Barclays Bank, in a research note last week, said there is no way the price of oil would get to $50 per barrel any time soon, as it slashed its three-month oil price forecast from $57 to $49.This is latest in a series of price downgrades at major investment banks. "We need to wait and see more production data before we can make any decision". The slowing pace of increases combined with massive drawdowns last week on both official crude inventory numbers from the US probably explains the positive sentiment in general at the moment.

The Energy Information Administration (EIA) said US crude stocks fell 4.7 million barrels during the week ended July 14., exceeding estimates for a 3.2 million draw in a Reuters poll.

OPEC ministers do not have any concrete plans for Libya and Nigeria to commit to the group's wider production caps at next week's committee meetings, a senior source close to OPEC told S&P Global Platts. Equatorial Guinea, which became an OPEC member in May, also resulted in the OPEC output increase by 0.15 mbpd.

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