Oil prices fall as Russia looks to boost output post OPEC pact

Oil prices fell in trading on Thursday after an OPEC report showed the market will likely remain in surplus despite the cartel’s supply cut agreement.  ConocoPhillips photo.

Oil prices down nearly 7 per cent this year

On Thursday, oil prices fell after investors learned Russia’s Gazprom was considering resuming its output in mature fields after the OPEC supply cut agreement expires and OPEC reported an increase in its July production numbers.

Brent crude ended the day down at $51.90, down 80 cents and US WTI was down by 97 cents to $48.59.

In its monthly report, OPEC boosted its outlook for crude demand next year and dropped its forecasts for output from its competitors in 2018.  But, another increase in the cartel’s production last month, suggests the market will remain in surplus despite the supply cut pact.

In July, OPEC’s output was up by 173,000 barrels per day (b/d) to 32.87 million b/d, led by increased production by Libya, Nigeria and Saudi Arabia.  On Tuesday, Saudi Arabia said it would cut supplies by up to 10 per cent to most buyers in Asia.

Global stockpiles remain above their longer-term average and as the US driving season winds down, investors are concerned that any attempts by any oil producers to boost prices may bring unwanted side-effects.

Despite the market’s down mood on Thursday, Reuters reports investors are turning more optimistic about the pace of the oil market rebalance as prices for prompt delivery of crude are trading higher than those for delivery in the future.

“This is the march toward the flattening of the curve,” SEB chief commodity strategist Bjarne Schieldrop told Reuters.

Gene McGillian, manager of market research at Tradition Energy told Reuters there is not enough information to sustain a rally.

“It seems like the market wants to go higher,” he said, “The market is searching for it, the question is will it get it.”

Since the beginning of 2017, oil prices have fallen by 7 per cent.