Oil holds above US$46 amid robust economic growth in China

Remigio Civitarese
Luglio 17, 2017

USA crude traded at $46.57, up 3 cents.

For cartel Opec - created in 1960 with the aim of supporting a sustainable price on the oil market - it is in some ways a flawless storm. After November previous year when the oil cartel announced its agreement with Russian Federation and 11 other producers to curb production in a bid to prop up prices, the overwhelming mood was optimistic.

A ministerial committee from OPEC and non-OPEC countries, which is headed by Gulf OPEC member Kuwait, meets in Russian Federation on July 24 to discuss compliance with the cuts, from which Nigeria and Libya are exempted due to years of output-sapping unrest.

United States crude inventories slid by 7.56 million barrels last week, the most since September previous year, data from the Energy Information Administration showed on Wednesday.

Kuwait's OPEC governor said that OECD crude oil inventories would fall in 2H17 due to a rise in global crude oil demand and OPEC's high compliance to the production cut deal.

Elsewhere on Nymex, gasoline futures for August jumped 3.4 cents, or about 2.3%, to end at $1.560 on Friday, for a weekly gain of around 4.1%. Three years ago, in July 2014, Brent crude traded at $110 a barrel, on the eve of an epic crash that saw the price of the world's preeminent light sweet crude benchmark plunge to $28 a barrel by February 2016. The new agreement extends the production deal for nine months until March 2018. However, the lack of progress from the first OPEC agreement to cut oil production has led the markets to question the OPEC's ability to send oil prices back up. Net long positions in the West Texas Intermediate futures contracts were slashed, the reason it fell as low as $42 in late June.

"The choices have increased and crude is available at competitive prices", said M. K. Surana, chairman of oil refiner Hindustan Petroleum Corp.

Oil prices posted steady and solid gains last week, clawing back some of the most recent losses and moving back up into the upper-$40s per barrel.

"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. This is the reason I accumulate Total at?42, Chevron at 102, Oxy at 58. The time to be an oil bear is over. As long as Saudi Arabia, Russia, Kuwait and the UAE maintain output cut discipline, the decline in oil inventories will only accelerate in the next four months.

"Those who wanted confirmation about global oil demand had it" in Chinese import figures, said Tamas Varga, an analyst with PVM Oil Associates. This means a cyclical bottom in Brent crude.

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