The oil market is impatient for any positive news as traders remain nervous in a period of prolonged uncertainty.
The monthly oil market reports were encouraging, yet the strength in the market appears months away, but a signal from Saudi Arabia was most welcomed.
Saudi Arabia’s energy minister Khalid Al-Falih hinted that he was ready to talk and to work with other producers to help stabilise the price and the market responded positively, boosting oil by more than 4 percent.
Al Falih has just been in the key job for just a few months and has demonstrated the Saudi leadership from day one.
OPEC producers will only agree on a production freeze if everyone, including the Iranians agree to a cut and that has been the major stumbling block in the past.
The discussion will take place in Algeria at the end of September.
OPEC got everyone excited
More news from OPEC early this week got the market excited when the organisation issued a press release quoting the organisation’s President, Mohammed Bin Saleh Al-Sada, Qatar’s Minister of Energy saying, “higher oil demand is expected in the 3rd and 4th quarters,” as supply tightens and he called for further investment in the industry.
The press release also mentioned in the last paragraph that “an informal meeting of OPEC member countries is scheduled to take place on the sidelines of the 15th International Energy Forum which will take place in Algeria from 26 to 28 September 2016.”
Again, the market may be getting over excited as all IEF energy ministers will attend this ministerial and this will be a good time for the new OPEC Secretary General, Mohammad Sanusi Barkindo to meet with everyone in advance of November’s formal OPEC meeting.
The Americans were attempting to hit back on the headline stakes and the special envoy with the US State Department’s Bureau of Energy Resources said OPEC was losing its impact.
“A few years ago the world stopped everything it was doing whenever the oil ministers met at OPEC in Vienna and we all waited with bated breath to see what the wise men would say,” said Amos Hochstein.
He claims, “that's not the case anymore” as the US and other players as well as other forms of energy are emerging.
He said investment in renewable energy in the US in 2015 was worth $56 billion, a trend he says OPEC needs to heed.
The Energy Information Administration said that US crude oil exports averaged 501 thousand barrels a day in the first five months of 2016, that's 9 percent or 43 thousand barrels more than the full-year 2015 average and the number of destinations increased to 16 countries, six more than in 2015 and double that of 2014.
OPEC has meanwhile observed that US imports were up, noting “the significant narrowing of the Brent-WTI spread made it possible for a comeback of West African crude to the US market, as observed in higher US crude imports, which have been above 8 million barrels a day recently.”
The oversupply on the market continues as the key players feel the pain of months of underinvestment and low prices.
Saudi Arabia delivered 10.9 million barrels a day in July as analysts observe the continued market share growth policy of the Kingdom.
Iraq is planning to boost production in coming months and Iran is working to revive its oil production.
This month’s OPEC monthly oil market report looks ahead with much anticipation for better demand.
“The higher growth anticipated for some of the major oil consuming economies is expected to lead to higher oil consumption in coming months, particularly with the onset of the winter season in the Northern Hemisphere.”
Hope alone won’t rebalance this market and the monthly report from the International Energy Agency cautions that oil-demand growth could be 1.2 million barrels a day in 2017, down from its previous estimate of 1.4 million earlier this year.
Oil prices are up more than 60 percent from the lows seen in January this year.
OPEC sees the easing of the global supply glut and stronger demand in place to help re-balance the market in the months to come.