Oil remains in a bear market on concern rising global supply will offset curbs by the Organization of Petroleum Exporting Countries and its partners including Russia. OPEC’s first assessment of world markets in 2018 suggested that its current output of 32.6 million barrels a day -- swollen by a recovery in Libya and Nigeria that are exempt from the cuts -- will be too high. “Given how the rebalancing process appears to be taking its time, it will be difficult to avoid having the discussion with Libya and Nigeria of eventually capping their output, provided of course the gains in the two countries are sustained,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. Click Read More below for more of the story.
Crude-oil futures edged higher on Thursday, but still trade near three-month lows after posting sharp losses in the previous session on concerns over U.S. fuel demand and a global supply surplus.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $51.89 a barrel, up $0.48 in the Globex electronic session. September Brent crude on London’s ICE Futures exchange rose $0.59 to $57.71 a barrel.
Market participants are still assessing the details of the Iranian nuclear accord and its impact on oil markets. The general consensus is that it will take several months for any significant volumes of additional Iranian oil to hit the market.
Fresh Iranian crude exports won’t start until next year because sanctions relief will take 4-12 months and will occur in a phased manner, Michael Wittner, head of oil research at Société Générale, said in a report.
“The volumes won’t be significant until mid-2016, perhaps not until the second half,” he said. “At that point, the global market will be balanced, and able to absorb Iranian volumes without a bearish impact on the markets.”
Others are more pessimistic and expect Iranian crude to delay any recovery in oil prices in the longer term.
“Considering the existing large oversupply in 2015, the return of Iranian oil volumes to the market will delay a rebalancing in the fundamental global oil markets in 2016,” said analysts at BMI Research, a unit of Fitch.
They said Saudi Arabia alone added more than 1 million barrels a day to global supplies since December 2014, far more than expected from Iran over the coming years.
“This situation will see a persistent oversupply in 2016, checking price rallies,” BMI said.
Wednesday’s weekly oil data from the U.S. Energy Information Administration was supportive for crude prices, with a larger-than-expected 4.3 million-barrel decline in stockpiles for the week ended July 10.