Oil prices rebounded sharply in volatile trade on 13 June after earlier edging down as OPEC reported an increase in its production for May despite a supply cut agreement. Brent crude futures were at $48.49 per barrel, up 20 cents, while WTI was at $46.31 per barrel, up 23 cents.
Prices initially nudged higher in early morning trade after the world's top exporter Saudi Arabia outlined cuts to customers in July that included a reduction of 300,000 barrels per day (bpd) to Asia. But, OPEC's monthly report showed output from the group rose by 336,000 barrels a day in May to 32.14 million bpd, led by a recovery in Nigeria and Libya which are exempt from supply cuts. The report said the market was re-balancing at a "slower pace."
Meanwhile, U.S. drilling activity has continued apace, driving up U.S. output by more than 10 percent since mid-2016 to above 9.3 million bpd. Traders said market intelligence firm Genscape had forecast a draw-down of more than 1.8 million barrels at the Cushing, Oklahoma, delivery point for U.S. crude futures.
Crude has lost 10 percent of its value since late May, when OPEC announced that it would extend production cuts. Analysts are split on whether crude prices will improve in the second half of the year as oil prices continue to be under pressure from the persistent oversupply situation, made worse by a surprise increase in US petroleum stocks last week. It had been earlier predicted that oil prices would pick up during the later part of the year, with some saying crude oil prices could shoot up to US$70 a barrel by the end of 2017 as supply and demand levels continued to rebalance.
Analysts now forecast outlook for Brent crude oil at an average of US$50 per barrel this year, with prices remaining in the range of between US$48 and US$52 per barrel in the second half of 2017. Some commentators have suggested that OPEC could revise its current proposals and consider a deeper cut, if the weakness in the oil price continued.
June 17, 2017