Oil at 5-month high on weak dollar, forecasts glut will recede

by Frankie Norman September 16, 2017, 0:39
Oil at 5-month high on weak dollar, forecasts glut will recede

But data show that in the first eight months of the year Iran's production averaged 3.79 million barrels daily. Brent is now above the * a href="http://oilprice.com/commodity-price-charts?1&page=chart&sym=CB*1" *US$55 psychological level for the first time since May 25, when OPEC made a decision to extend the production cuts as-is in a move that largely disappointed a market that was expecting a firmer "whatever it takes" action.

"Outright benchmark crude prices gained in August, reflecting higher demand in the northern hemisphere and tight physical markets for oil products", the IEA said.

He also said an extension to the cartel's cuts was possible since volumes of oil stocks were still a challenge.

"Depending on the pace of recovery for the USA refining industry post-(Hurricane) Harvey, very soon OECD product stocks could fall to, or even below, the five-year level", added the IEA. And crucially the market is in backwardation, although it's only a very shallow one. That lack of cohesion has been evident in the way so many of OPEC's members have exceeded the limits placed upon them as part of the attempted market intervention.

OPEC issued its monthly oil market report earlier in the week also supporting stronger oil demand growth.

Meanwhile, the world's energy watchdog said that global oil supplies fell in August for the first time in four months. The level of compliance with the OPEC pact about reducing the oil production in August rose to 82% compared to the previous value (75%). Unrest in Iraq and Venezuela will also keep output at check. EIA inventory data, meanwhile, is likely to show a huge build in crude oil stockpiles as US refinery outages from Hurricane Harvey leave oil locked in storage.

Although bullish demand outlooks have been driving prices higher, there's a psychological barrier at the US$50 mark, which is "still a selling point for a lot of people", Michael Lynch, president of Strategic Energy & Economic Research Inc in Winchester, Massachusetts, said by telephone.

OPEC is working to drain the five-year surplus through coordinated production declines and economists at the group said Tuesday that its demand forecast for the year was up 50,000 barrels per day to 1.42 million bpd, reflecting OECD growth as well as China.

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