OIL PRICES: $35 - $45
NASDAQ wrote, U.S. oil futures have been very volatile in 2016 with prices recovering from a 12-year low of $26.21 a barrel in February to $50/barrel mark in early June and then slipping again to under $40.
While factors like Canadian wildfires, Nigerian outages/disruptions, production issues in Venezuela and a strike by Kuwaiti oil workers contributed to jump in prices earlier this year that saw the benchmark recover significantly, these issues have largely vanished from the market. As of now, overproduction of crude and a glut of refined products keep the commodity under pressure.
At over 520 million barrels, current crude supplies are up 15% from the year-ago period and are at the highest level during this time of the year. As it is, improvement in oil fundamentals remain fragile with the existing stocks of refined product inventories - gasoline and distillate - remaining at their maximum seasonal levels in at least 20 years despite healthy demand. Piling on the misery is the Baker Hughes report revealing a steady rise in the U.S. oil rig count and pointing to the resurgence in shale drilling activities.
A number of major industry players, including Exxon Mobil Corp. (XOM), Royal Dutch Shell plc (RDS.A) and BP plc (BP) have reported sub-standard second-quarter numbers as lower energy prices take a toll.
Over the past few trading days, West Texas Intermediate (WTI) crude futures have surged around 10% to around $45-a-barrel on renewed expectations of a production freeze from the 14-member OPEC bloc and Russia. However, several analysts have expressed skepticism over this mini-rally, pointing to the last such attempt made in April that failed spectacularly.
Oil is facing the heat on several other fronts as well. Perhaps most important pertains to the mounting worries about China's crude demand. In particular, the Asian giant's currency devaluation has stoked speculation about soft economic growth in the world's No. 2 energy consumer.
What's more, in the absence of production cuts from OPEC, the resilience of North American shale suppliers to keep pumping despite crashing prices, and concerns over the effects of Brexit on crude demand., not much upside is expected in oil prices in the near term. Moreover, a stronger dollar has made the greenback-priced crude more expensive for investors holding foreign currency.
As it is, with inventories at the highest level during this time of the year, crude is very well stocked. On top of that, the top producers of Middle East - pumping at full throttle - have indicated time and again that they are more intent on preserving market share rather than attempting to arrest the price decline through production cuts. Therefore, the commodity is likely to maintain its low trajectory throughout 2016.
In our view, crude prices in the next few months are likely to exhibit a sideways-to-bearish trend, mostly trading in the $35-$45 per barrel range. As North American supply remains strong and demand looks underwhelming, we are likely to experience pressure to the price of a barrel of oil.
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OGJ - Total SA made a natural gas discovery on the Glendronach prospect offshore UK West of Shetland that it believes can be commercialized quickly and at low cost by leveraging the existing Laggan-Tormore infrastructure.
NOVATEK - PAO NOVATEK (“NOVATEK” and/or the “Company”) announced today that its wholly owned subsidiary, NOVATEK Gas and Power Asia Pte. Ltd. has shipped its first LNG cargo to the Brazilian market with LNG produced from the Yamal LNG project. The cargo was delivered to the Bahia Regasification Terminal owned by Petrobras.
REUTERS - Benchmark Brent crude LCOc1 hit its highest since November 2014 at $80.94 per barrel, up $2.14 or 2.7 percent, before easing to around $80.75 by 1150 GMT. U.S. light crude CLc1 was $1.25 higher at $72.03.
OPEC - The JMMC noted that, despite growing uncertainties surrounding market fundamentals, including the economy, demand and supply, the participating producing countries of the DoC continue to seek a balanced and sustainably stable global oil market, serving the interests of consumers, producers, the industry and the global economy at large. The Committee also expressed its satisfaction regarding the current oil market outlook, with an overall healthy balance between supply and demand.