Global oil prices inch up on hopes of oil glut abating as US refineries back online
Oil prices inched up on Monday amid anticipation that the oil glut may abate as refineries come back online later in the year, a situation that may give reprieve to managers of the Nigerian economy, which relies heavily on oil revenues.
According to New York-based Wall Street Journal, Brent crude, the global oil benchmark, rose 0.99% to $45.99 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 1.1% at $43.48 a barrel.
WSJ also reported that the gains had additional support from bargain hunters who stepped in after crude futures slipped into a bear market last week, and a heavy storm in the U.S. that led to supply disruptions. Tropical storm Cindy closed several oil rigs and platforms in the Gulf of Mexico, an area responsible for over 17% of the country’s oil production.
“Some of this physical glut will disappear in the third quarter as refineries come back online and start consuming the crude,” Bjarne Schieldrop, chief commodities analyst at SEB Markets told WSJ.
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“We will see inventory drawdowns but they won’t be as substantial as expected since Libya and Nigeria have recovered.”
The Organization of the Petroleum Exporting Countries and a handful of nations outside the cartel have cut global supply by about 2%. But since the beginning of the year, investors have grown concerned that rising output in OPEC countries exempt from the deal such as Libya and Nigeria, and outside producers including the U.S., has undercut the oil cartel’s efforts.
The latest data from oil-services firm Baker Hughes Inc. showed U.S. shale producers added 11 more rigs, marking the 23rd weekly rise and the longest streak of increases in decades.
Meanwhile, investors are treading cautiously as they watch the volatile relations between Qatar and a number of Arab nations.
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Saudi Arabia and several Gulf states imposed an embargo on Qatar over accusations the country supports extremists. Qatar has denied the allegations. Since then the Saudis have stipulated terms under which the restrictions could be lifted. They include that Qatar must shut down the news organization Al Jazeera and cut diplomatic ties to Iran.
“It seems that further political trouble is brewing in the Gulf region,” said analysts for JBC Energy Market in a recent report. “And with Saudi Arabia reportedly seeking to get prices towards $60 per barrel for the Aramco IPO, it is no surprise that some market participants are treading more carefully at this point.”
Saudi Arabia is seeking to take state-owned Saudi Arabian Oil Co. public—a move tentatively set for 2018. Under the right market conditions the listing of the firm could raise more than $100 billion in proceeds, which would be a record, analysts say.
Nymex reformulated gasoline blendstock—the benchmark gasoline contract—rose 0.6% to $1.43 a gallon. ICE gasoil changed hands at $413.75 a metric ton, up $2.50 from the previous settlement.