Saudi Arabia: Ongoing global oil glut keeps downward price trend intact in June
June 28, 2017
Signs suggesting that the global oil glut has not gone away despite the extension of the OPEC oil cuts into 2018 are weighing on crude prices. The OPEC oil basket traded at USD 42.6 per barrel on 22 June, a decrease of 17.3% from the same day in May and the lowest value since November 2016. Oil prices have lost 8.4% of their value from the same day in 2016 and they are now down 20.1% since the start of the year. In the days following, oil prices recovered slightly on speculation that they had finally hit bottom and better-than-expected inventory figures in the U.S. the week ending 23 June. That said, crude prices remained below the USD 45 per barrel mark.
The oil market is far from rebalancing as output growth from Canadian and U.S. oil fields remains buoyant, while global stockpiles remain stubbornly high. Moreover, production in Libya and Nigeria, both of which are exempt from the OPEC deal, soared in May on the back of improving security conditions. Despite the failure to push up oil process significantly, the Joint OPEC-Non-OPEC Ministerial Monitoring Committee revealed on 22 June that the countries’ compliance level with the oil deal reached 106% in May, up from 102% in April.
According to the latest OPEC Monthly Oil Market Report, combined oil output in OPEC countries increased from 31.80 mbpd in April to 32.14 mbpd in May, mainly reflecting stronger production in Iraq, Libya and Nigeria. Conversely, crude production in Angola and the United Arab Emirates decreased significantly in the same month. Saudi Arabia produced 9.94 mbpd in May, unchanged from April’s production.