Outlook for oil: May 16
Oil market is outstandingly rising, though OPEC meeting results are not positive. Let us remind that Saudi Arabia and Iran didn’t endorse the initiative of oil production freezing at January-February level of the current year. In fact, the reason of Iran refusal is that it is not ready to decrease the production and still trying to reach the level before sanctions. Saudi Arabia also responds by blocking the initiative.
Nevertheless, the tendency on oil market is becoming better after a short period of time. It is less speculative now. Though the end of the previous week was quite negative for oil market, we could notice the rise of both oil grades on Monday.
According to the OPEC monthly report, published on Friday, the group production reached 32.44 million barrels per day in April, that exceeded the March level by 188000 barrels per day. The April figure reached its maximum since 2008, as the sanctions against Iran were lifted, and the Russian’s and other non-organization members’ initiative to halt the growth of world reserves by freezing production fell last month.
OPEC has warned that the world market oversupply may rise this year, as its members increase their production by reducing production in other countries, affected by the collapse of raw materials prices.
The situation in the U.S. oil market continues to deteriorate: following the news about many energetic companies’ pre-default or default, the number of drilling rigs is declining again: last week the number dropped by 10, from 328 to 318 units. Starting from April 15 of the current year, the rig number fell by 36, which can be considered a sufficient argument for the US sector problematic.
The statements of Goldman Sachs analysts may warm up the market on Monday, as they believe the oil market goes from the oversupply to a gradual deficit. In addition, the changing speed is considered to be unexpectedly high. Forecasts for demand growth have also been revised: the demand was expected to grow this year by 1.2 million barrels. This value is now changed to 1.4 million barrels.
Currently (11:00 GMT) North Sea Brent crude is traded at $48,73. The increase from Friday was about $0,94 per barrel. WTI Crude oil has reached the level of $47.07 per barrel. The increase from Friday was about $0,7 for barrel.