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Asian crude oil buyers spoilt for choice
Asia has become the pivotal competing ground for both US and OPEC producers hopeful of finding a home for their extra barrels.
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Workers tighten a drilling machine at an oil and gas block in Indonesia. (Kompas.com/File)
T
he settlement price for the September ICE Brent futures contract surpassed a key resistance point at US$50/ barrel in the last days of July, after markets consolidated on data from the United States, OPEC and other non-OPEC producers that seemed to hint at a gradual pullback in global oil oversupply.
The front-month September ICE Brent futures contract settled at $52.52/b on July 28, up from $47.92/b on June 30. But other than the upward rally in the last week of July, it traded within a narrow range.
The prompt ICE Brent timespread did flip into backwardation for the first time since Jan. 31, and was at a 30 cent/b premium to October ICE Brent as of the July 28 settle.
The recent momentum follows Saudi Arabia’s commitment to cap its August exports at 6.6 million b/d. Oil prices got a boost from the most recent OPEC/nonOPEC meeting, a concentrated effort by Saudi Arabia to reiterate their commitment to rein in oil production and exports.
Oil analysts said that the group of oil producers had little choice but to maintain their original oil quotas from the October 2016 meeting as a baseline from which to operate for the rest of the year.
Beyond that, quarterly meetings of the compliance committee and various ministers from the alliance generate about a day’s worth of cautious speculation but markets are quick to self-correct by refocusing on supply-demand fundamentals.
US production and inventory data remains a key driver of oil prices currently. The state of US oil production, demand and exports have gradually come to the forefront as this year’s swing factor as crude oil markets become increasingly desensitized to the presence of the OPEC/ non-OPEC alliance in cutting production.
