Oil prices failed to move higher last week and the upward momentum faded in the light of increasing Opec output. US oil production also continued to inch up while US oil inventories fell across the board. The focus of the markets this week will be on the meeting between Opec and partners in Russia to review the deal.
Negative headlines continue to hit oil prices and oil has failed to meaningfully move higher in recent weeks. Estimates suggest that Opec oil output may cross 33.0 million bpd in July on the back of increased output from Libya and Nigeria. Opec output has been edging higher in the last couple of months and June production was higher by 0.5 mbpd to 32.7 mbpd, a six-month high. The re-balancing process remains slow and resumption in Nigerian and Libyan output has complicated the Opec strategy.Nigeria. Opec output has been edging higher in the last couple of months and June production was higher by 0.5 mbpd to 32.7 mbpd, a six-month high. The re-balancing process remains slow and resumption in Nigerian and Libyan output has complicated the Opec strategy. Nigerian production is back at a 17 month high of 2.0 mbpd while Libyan output has nearly tripled from last year with production nearing 0.95 mbpd. This roughly translates to an increase of about 0.4-0.5 mbpd from these two and negates nearly half of the Opec’s 1.2 mbpd cut. In this context, the Opec meeting this week will be very crucial. There are reports that Libya and Nigeria may not be asked to limit output until their production stabilises. This is a negative from the price perspective as it could lead to increased OPEC output in the coming months.
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