Crude Oil Futures - Nov 16 (CLX6) witnessed a surge on October 10, 2016 as Russia supported Saudi Arabia for freezing oil production. Oil prices have been under pressure due to oversupply from the major producers across the world. The global oil supply reached 97.2 million barrels a day as of September 2016, which is a rise of 200,000 b/d on a year-over-year basis while increased by 600,000 barrels a day against August 2016, based on International Energy Agency (IEA). IEA believes that the market would continue to be in over supply zone even in next year if OPEC countries do not make efforts of cutting production which could hamper prices further.
But, OPEC decided to decrease their supply in the range of 32.5 and 33 million barrels per day during the September meeting in Algeria. On the other hand, Russia did not extend their support earlier to OPEC for cutting the oil production, which also lead to further oil pressure as Russia is also a major oil producer and even enhanced their output to 400,000 b/d leading to a post-Soviet production of 11.1 million b/d for September 2016.
However, with the recent statement from Vladimir Putin, president of Russia, on extending their support to join OPEC in cutting oil production, oil prices again started recovering. IEA believes that this agreement could bring back a balance in supply and demand by next year.
On the other hand, challenges continue to persist as Russia’s major oil producer Rosneft OJSC, which represents over 40% of the country’s oil output, is speculated to not agree to cut output. Moreover, Non opec countries are also posing production pressure wherein the output rose 500,000 barrels a day in September 2016 driven by rising Russian and Kazakhstan production, as per IEA report. Despite OPEC efforts to bring a balance in the Oil market, they continue to face challenges from Libya and Nigeria while even Iraq might not restrict their production.
Oil demand is also seen to be slowing down during the third quarter of 2016, which is forecasted to decline to the lowest quarterly rate since 2012 impacted by pressure from OECD countries as well as China, as per IEA. Demand was otherwise said to be improving during the fourth quarter of 2016 due to winter season. Meanwhile, the detailed proposal on these OPEC and Russia efforts on production would be out in the next month’s OPEC meeting and if OPEC would implement their plans, the oil market may see a certain stability.
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our
Terms & Conditions has been provided please go through them and also have a read of the
Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in: BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.