Oil prices were steady early on Monday morning, searching for a catalyst for direction while OPEC is holding a meeting of its Joint OPEC-Non-OPEC Technical Committee (JTC), which monitors the cartel and friends’ compliance with the output cuts.
At 9:15am EST, WTI was at US$48.42 and Brent was at US$52.47.
Two weeks ago, OPEC held a meeting with some of the producers and cited its members Iraq and the UAE, as well as non-OPEC signatories to the deal Kazakhstan and Malaysia, as laggards in compliance.
The market is now awaiting any news, hints, or comments that are expected to follow today’s meeting in Vienna to discuss compliance and the results of the extraordinary meeting in Abu Dhabi two weeks ago.
In its latest Monthly Oil Market Report, OPEC said that its production increased in July, by 172,600 bpd compared to June, to reach 32.869 million barrels. Libya, Nigeria, and Saudi Arabia were the main drivers behind the OPEC production increase.
While Libya and Nigeria are exempt from the deal, the other OPEC members are not doing “whatever it takes” to clear the glut.
The latest monthly oil market report by the IEA showed that OPEC compliance slipped to 75 percent in July, from 77 percent in June. Compliance within the non-OPEC group of producers party to the cuts was 67 percent. Combined, the 22 producers that have pledged to cut production are overproducing a total of 470,000 bpd, according to the IEA. Related: Forget Oil Prices, Oil Majors Are A Buy
Saudi Arabia’s Oil Minister Khalid al-Falih hinted (again) earlier this month that deeper cuts are not entirely off the table, but the market and analysts do not expect the cartel to be willing to cut more and lose more market share and oil revenues at these oil prices.
Inventory draws in the U.S. have been sustained for a few weeks now, but oil prices have been depressed by the continuously rising U.S. output. The market would be expecting to see if the large inventory draws continue in the coming weeks, and if the draws were mostly the result of the driving season in the U.S.
According to Giovanni Staunovo, a commodities analyst at UBS Wealth Management, as quoted by MarketWatch: “There is the risk that inventories start to increase again” if the draws were only due to seasonal factors.
By Tsvetana Paraskova for Oilprice.com
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