Volatility In Oil Market Could Affect 2017 Budget Implementation - Kachikwu

Energy Snapshot What Happened on July 3–7 2017

As oil price weakens, so does high yield, and vice versa, but as Warren Estey, head of America's natural resources at Deutsche Bank sustained, increased volatility means less room for errors when markets become more efficient, even if the eventual profits can be sky high.

The French oil and gas company Total reported that it had signed an agreement with Qatar Petroleum and received a 30 percent share in the concession of the Al-Shaheen offshore oil field for 25 years, starting July 14, 2017.

Prices drifted lower during Thursday's Asian session with buyers unable to make any impression.

Finally, OPEC forecast the world will need 32.20 million bpd of crude from its members in 2018, down 60,000 bpd from this year. Saudi Arabia has increased its flows, the IEA said, as well as Libya and Nigeria who are not part of the production freeze.

The IEA said global oil supply rose by 720,000 barrels per day last month to 97.46 million bpd, 1.2 million bpd higher than a year ago, as non-OPEC production increased. The latest effect of OPEC strategy is the 18% fall of oil futures since the beginning of the year. They said the rising global demand, and its outperformance of recent expectations should be the primary takeaway from the IEA report. Global oil inventories are forecast to be relatively unchanged in the second half of 2017 before returning to average inventory builds of 0.2 million b/d in 2018. The IEA expects US crude production to grow by 780,000 barrels per day next year.


Supply issues will tend to remain the dominant short-term focus with more positive rhetoric from OPEC needed to revive confidence, although choppy trading conditions are liable to continue. This month, there are two hitches: "a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by Opec with its own output agreement", the IEA said.

The global cuts accord between OPEC and non-OPEC producers faced "headwinds" in the first quarter this year and didn't cause crude stockpiles to decline fast enough, Barkindo said.

"We opine the industry is more focused on robust activity at stable oil prices, rather than very high oil prices at this juncture, which is not sustainable", it said.

Many have also voicing out on requiring an output limit to Nigeria and Libya and without any kind of production restraint on either of them; oil prices only have a small chance of reaching the $50 level again. Demand next year is expected to rise 1.4 million bpd to 99.4 million bpd. U.S. crude inventories fell 7.6 million barrels last week, its biggest weekly plunge in 10 months, the U.S. Energy Information Administration (EIA) said. However, recently both countries have ramped up production, feared to offset the cuts implemented by the rest of the group.

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