17 July, 2017
USA crude traded at $46.49, down 5 cents.
Brent and WTI prices were roughly 5% above the week's lows, aided by reports of accelerating demand growth from the IEA, crude oil import growth in China and falling crude stocks in the US. Brent crude prices are 17 per cent below their 2017 opening level despite strong compliance by OPEC with the production-cutting accord.
Libya, Nigeria, and Iraq are reported to be among the worst offenders of OPEC's attempt to rebalance the market.
Six ministers from OPEC and non-OPEC nations, including Kuwait, Venezuela, Algeria, Saudi Arabia, Russia and Oman, will meet on July 24 in St. Petersburg, Russia, to discuss the current situation in the oil market. OPEC is hoping higher demand in the second half will get rid of excess inventories.
"The most pronounced inventory reduction in the U.S.in 10 months and the resulting decline in USA crude oil stocks to below the 500 million-barrel mark in the last reporting week have clearly prompted a shift in sentiment", said Carsten Fritsch, analyst at Commerzbank.
There is evidence world oil demand is picking up, notably in the United States and China, the world's two biggest oil consumers.
"Meanwhile, figures showing production at Libya's recently-opened Abu Attifel oil field has reached 85,000 barrels per day and could soon rise to 100,000 barrels per day is having a muted impact on sentiment", a market report emailed from London oil broker PVM read.
He added surging stock markets had added a "feel-good factor" to oil.
Still, oil stocks remained comfortably above the five-year average and prices were more than 15% below their 2017 highs.
This added to an IEA report raising its demand estimate.
Global oil supplies rose by 720,000 barrels per day (bpd) in June across the world and by 340,000 bpd in OPEC countries, according to the report, driven not only by Libya and Nigeria but also countries subject to the cartel's cutback agreement.
"OPEC compliance with production cuts slipped to 98 percent in June, but more importantly output from exempt (from cutting) members Libya and Nigeria is now about 700,000 bpd higher than at the time of the November OPEC agreement, offsetting about 60 percent of the OPEC cuts".
OPEC said its production rose by 393,000 bpd in June to 32.611 million bpd, thanks to extra output from Nigeria and Libya.
Crude prices are still around levels in late November last year, when a group of oil producers including Russian Federation and Organization of the Petroleum Exporting Countries (OPEC) pledged to withhold around 1.8 million barrels per day (bpd) of output between January this year and March 2018 to tighten the market.
The cuts were envisaged for six months and extended for another three.
"US crude inventories fell 7.6 million barrels last week, its biggest weekly plunge in 10 months, the US Energy Information Administration said on Wednesday".
Oil prices have dropped in recent weeks to levels not seen since the end of previous year as investors lost faith in a deal between OPEC and non-OPEC producers to reduce output, while USA shale oil production has risen sharply.