Recap: The oil market continued to trend lower on Friday in follow through selling seen on Thursday on renewed concerns about oversupply. The market was pressured as further confirmation of increasing OPEC production helped erase any of its overnight gains. The market posted a high of $47.21 before it sold off on the Petrologistics report stating that OPEC’s production in July increased by 145,000 bpd to more than 33 million bpd. The market gradually traded lower and retraced little more than 38% of its move from a low of $42.27 to a high of $47.74 as it sold off to $45.62 ahead of the close. The September WTI futures settled down $1.15 at $45.77 and later continued to trend lower and posted a low of $45.54. The September Brent contract settled down $1.24 at $48.06. The product markets also settled in negative territory, with the heating oil market settling down 2.84 cents at $1.5152 and the RBOB market settled down 4.29 cents at $1.5633.
Fundamental News: Baker Hughes reported that the number of rigs searching for oil fell for the second week in the past four weeks, falling by 1 to 764.
Petrologistics reported that OPEC output is set to increase by 145,000 bpd in July, indicating lower compliance with the OPEC and non-OPEC production cut deal. Compliance with the agreement has been high so far but OPEC production has increased in recent weeks, in part due to increased output from Libya and Nigeria, which were exempt from the agreement. OPEC-14 supply is expected to exceed 33 million bpd in July which represents an increase of 145,000 bpd over June, driven by increased supply from Saudi Arabia, UAE and Nigeria. In June, OPEC output increased by 393,000 bpd to 32.611 million bpd.
The UAE’s Oil Minister, Suhail bin Mohammed al-Mazroui, said he was committed to the output cut agreement and added that he hoped the OPEC and non-OPEC output cut agreement would have a significant impact in the third and fourth quarters. He said he hopes that global supplies will start tightening in the second half of the year when demand increases.
Kuwait’s Oil Minister, Essam al-Marzouq, said attendees would discuss steps for continuing implementation of the production cut agreement, review market conditions and examine any proposals related to the deal at a meeting next week. The Joint Ministerial Committee of OPEC and non-OPEC states, which includes Kuwait, Venezuela, Algeria, Saudi Arabia, Russia and Oman, are scheduled to meet in St. Petersburg on Monday.
Saudi Arabia’s crude oil inventories fell in May for the third consecutive month, reaching the lowest level in more than five years. According to JODI data, Saudi Arabia’s crude oil stocks fell to 258.8 million barrels in May from 263.9 million barrels in April.
A BMO analyst stated that Venezuela’s oil production may fall as a result of ongoing turmoil with the possibility of new US sanctions, leading to an increase in crude prices and a narrowing light-heavy differential.
Colonial Pipeline Co said operations on its main gasoline line have resumed following repair work. The company had shut line 1, with a capacity of 1.2 million bpd running from Houston, Texas to Greensboro, North Carolina on Thursday.
IIR reported that US oil refiners are estimated to shut in 107,000 bod of capacity in the week ending July 21st, increasing available refining capacity by 48,000 bpd from the previous week. IIR expects offline capacity to remain unchanged in the week ending July 28th before falling to 101,000 bpd in the following week.
Early Market Call - as of 9:00 AM EDT
WTI - Aug $46.17, up 40 cents
RBOB - Aug $1.5620, down 11 points
HO -Aug $1.5217, up 69 points
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