On Monday, oil futures traded higher
as members of the Organization of the Petroleum Exporting Countries signaled for
another probable discussion with the oil kingpins to reduce production.
As the over glut supply concerns
persist, speculation arose in the market that the OPEC was planning to convince
the major oil kingpins to cut their respective output.
Matt Smith of Clipper Data noted
that OPEC members, including Venezuela, Ecuador and Kuwait are said to be
behind this latest reincarnation. However, Mr. Smith was likely not convinced by
the new effort of the members of OPEC.
“But just like previous endeavors,
it seems doomed to fail, given key OPEC members (think: Saudi Arabia, Iraq, and
Iran) persist in their battle for market share, ramping up exports apace.”
Meanwhile, aside from the glut
supply concerns, the ramp up of oil drilling in the U.S. added to the factors
which push the output even higher.
Based on the records of the Baker
Hughes, the oil rigs operating in the U.S. met its highest since March. The
data came after the rally of dollars over the strong job data last Friday.
Brent futures was up by 7 cents
to change $44.34 per barrel while the U.S. West Texas Intermediate crude
futures advanced 10 cents to $41.90 per barrel.
On the other hand, the demand for
oil remains strong since 2015 and has continued for the last two quarters of
2016. The weekly report of the U.S. stockpile data would be closely watched by
the oil experts alongside with the supply and demand levels released by the
International Energy Agency.
In China, the trade balance
surplus last July came at $52.31 billion higher than the estimated $47.6
billion. The imports decreased 12.5 percent, while exports lost 4.4 percent.
An analyst forecasted a
possibility of a drop of demand between 1.1
percent to 1 percent from the second half of the year to the start of
2017 as the oil market digested the domino effect brought by Brexit. “In July
following the UK Brexit vote, the IMF downgraded global growth by 10 basis
points (bp) in 2016 and 20 bp in 2017. This has negative implications for
demand.”
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