JAKARTA (TheInsiderStories) – Global oil prices fell almost 1 percent amid the low demand. This morning, West Texas Intermediate prices for July 2019 shipments on the New York Mercantile Exchange were at US$52.58 per barrel, down 1.29 percent compared to yesterday’ price at $53.27 a barrel.
At the same time, Brent oil prices for August 2019 shipments on ICE Futures also dropped 1.22 percent to $61.53 per barrel. Overall, the international benchmark oil price was stagnant at the level of $62.29 per barrel.
Recently, United States’ (US) Energy Information Administration (EIA) cut its forecast for global oil demand this year to 1.22 million barrels per day (MBPD) from earlier 1.38 MBPD. The outlook mainly due to the trade war between US and China.
While, Saudi Arabia’ Energy Minister Khalid Al-Falih, cited in The New Arab, said of all the signatories to the OPEC+ deal to rebalance the oil market through production cuts, Russia is the last member to not get on board with additional production cuts. Russia and Saudi Arabia are the two largest oil producers that are part of the OPEC+ agreement.
While, Russian Energy Minister Alexander Novak said on Monday (06/10) that there was a risk still that oil prices could fall to $30 per barrel, because the amount of oil produced in second half could exceed market demand for oil.
Delicate situation of oil price has made Saudi Arabia recommended oil producer countries to gently driving oil inventories down. It sees no need to boost production quickly now, with oil at around US$70 a barrel, as it fears a price crash and a build-up in inventories.
Minister Khalid also asked OPEC to not make hasty decisions ahead of its next meeting in late June, to help it reach the best decision on output. While, Novak said OPEC and non-OPEC oil producers ministerial panel had recommended to monitoring the market, due to uncertainties and the recommendations would be made in June.
He said, the option of easing had been discussed and that the oil supply situation would be clearer in a month, including from countries under sanctions.
Starting January and for the next six months, OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, has agreed to reduce output by 1.2 million barrels per day (bpd), a deal designed to stop inventories building up and weakening prices.
OPEC meeting comes amid concerns of a tight market. Iran’ oil exports are likely to drop further in May and shipments from Venezuela could fall again in coming weeks due to US sanctions.
Previously, Yemen Houthi’ drone targeting to attack two Saudi Arabian’ tankers and main pipe channels is considered not only hitting security, but also world oil supply and global economy.
Iran-backed Houthi’ action is also increasing the heated-already tension in Middle east. Saudi is known as the world’ biggest oil exporter, with 10 million barrels per day (bpd) production and around 7 million bpd export per day.
Its two pumping stations n the east-west pipeline transport five million barrels of crude oil per day, also provide a strategic alternative route for Saudi exports if the shipping lanes from the Gulf through the Strait of Hormuz is closed.
The fall in non-OPEC supply was mainly driven by Kazakhstan, Canada, China, and Russia, according to the report. The share of OPEC crude oil in total global production stayed unchanged at 30.4 percent in April compared with the previous month.
Crude oil output decreased mostly in Iran, Saudi Arabia, and Angola, while production increased in Iraq, Nigeria, and Libya. Iran saw declines of 164 thousand barrels per day lowering the overall production figure to around 2.5 million bpd, while crude oil production in Iraq increased by 113 thousand bpd to reach 4.6 million bpd.
Unchanged from last month’ report despite some revisions within the regions, world oil demand growth for 2019 is projected to increase by 1.21 million bpd, to average 99.94 million bpd.
Demand for OPEC crude in 2019 was revised up by 0.3 million bpd from the previous report to stand at 30.6 million bpd. However, it is 1.0 million bpd lower than the 2018 level.
Top exporter Saudi Arabia cut output despite oil prices hitting 2019 high above US$75 a barrel and United States (US) President Donald Trump urging action to lower prices.
Supply losses in OPEC members Iran and Venezuela, both under US sanctions, have deepened the impact of an OPEC-led production-limiting deal. The so-called OPEC+ group of producers meets next month to review whether to maintain the pact beyond June. Vienna-based OPEC trimmed its estimate of oil supply growth from outside the group in 2019 and said the rapid rise in production of US tight oil.
“Supply growth is likely to be slower than last year amid the expected weaker global economic growth. The US tight oil production is increasingly faced with costly logistical constraints in terms of out-take capacity from land-locked production sites” OPEC said.
OPEC, Russia and other non-member producers are reducing output by 1.2 million bpd from Jan. 1 for six months. The producers meet on June 25-26 to decide whether to extend the pact.
OPEC+ returned to output cuts this year due to concern that an economic slowdown would produce a supply glut. But demand has weakened no further for now, as OPEC kept its estimate of global growth in oil use in 2019 steady at 1.21 million bpd.
The 11 OPEC members required to cut output achieved 150 percent compliance in April with pledged curbs, compared with 155 percent initially reported in March. OPEC estimates it needs to provide an average of 30.58 million bpd in 2019 to balance the market, a figure increased by 280,000 bpd month-on-month partly due to the lower non-OPEC supply outlook.
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