Oil prices dip, market struggles to get through $50

Fundamental justification for stalled oil prices: Analyst

Oil prices dropped slightly in trading on Tuesday as exports from some OPEC producers increased in recent week and have slowed the reduction in the global glut of crude.

Brent crude settled down 23 cents to $52.14/barrel by 1:17 p.m. EDT and US light crude was 22 cents cheaper at $49.17/barrel.

“It’s just unable to break above $50,” Kyle Cooper, consultant for ION Energy told Reuters. “It’s boring, but there’s a fundamental justification for prices being stuck between $45 and $55 without a significant geopolitical event.”

Exports from Nigeria and Libya pushed overall OPEC crude exports to a record high in July.  Libya’s production in July was 1.03 million barrels per day (b/d), according to a Reuters survey. Production at the Sharara field, Libya’s largest, is returning to normal after protesters broke into a control room at the facility.

The two African countries had been exempt from OPEC supply pact due to unrest.  The rececnt increases in Nigerian and Libyan production have thrown a wrench into OPEC’s efforts to curb the global supply of oil and fueled doubts over the effectiveness of the cartel’s cuts.

Reuters sources say Saudi Aramco, Saudi Arabia’s state-owned oil company, will cut allocations to its customers worldwide in September by at least 520,000 b/d.

On Tuesday, a technical committee comprised of OPEC and non-OPEC officials met in Abu Dhabi after which they announced the cartel will expect greater adherence to the supply cut agreement.

Last December most OPEC members along with some non-members, including Russia, agreed to reduce their production by a total of 1.8 million b/d.

So far, Iraq and United Arab Emirates have shown poor compliance with the deal and non-OPEC participants Kazakhstan and Malaysia have boosted their output in recent months, according to the International Energy Agency.

At the Abu Dhabi meeting, a panel comprised of officials from Russia, Kuwait and Saudi Arabia along with officials from OPEC’s headquarters in Vienna, met individually with officials from the four non-compliant pact members.

“Discussions were conducted in a constructive atmosphere and proved fruitful,” OPEC said in a statement.

The cartel added “The conclusions reached with the countries at the meeting will help facilitate full conformity.” OPEC did not give details on how compliance would be increased.

Investors are awaiting the weekly petroleum status report from the US Energy Information Department which will report the status of crude stocks and refinery runs.

A Reuters poll on Monday showed US crude inventories and product stockpiles are expected to fall for the sixth straight week.