Oil Holds Above $46 Amid Robust Economic Growth in China

Brent for September settlement on Friday climbed US$0.49 to end the session at US$48.91 per barrel on the London-based ICE Futures Europe exchange.

Moves in crude oil prices impact on oil and gas producers like Stone Energy (SGY), Northern Oil & Gas (NOG), and Bill Barrett (BBG).

KPI’s parent, Kuwait Petroleum Corp. – the company in charge of the nation’s oil production – is considering boosting capacity to 4.75 million barrels a day by 2040, he said.

At the start of the week, the upside was limited due to rising US production, steady growth in producing oil rigs and increasing production in Libya and Nigeria.

“The slowing pace of increases combined with massive drawdowns last week on both official crude inventory numbers from the USA probably explains the positive sentiment in general at the moment”.

“There are some encouraging signs that things are getting better for crude, last weeks healthy stock draws in the USA and the rig count slowly but surely not increasing at the rates they were earlier on in the year, but fundamentally we are still in an oversupplied market”, said Matt Stanley, fuel broker with Freight Investor Services (FIS).

Prices went up to about US$50 a barrel in the month immediately following the agreement, and stayed above US$50 over January. The global benchmark crude traded at a premium of US$2.18 to September WTI. Eugen Weinberg has been saying this for a while, but he has been a lonely voice among bankers who rushed to revise their oil price forecasts upwards before the ink on the OPEC agreement was dry. Net long positions in the West Texas Intermediate futures contracts were slashed, the reason it fell as low as $42 in late June.

“The most pronounced inventory reduction in the U.S.in 10 months and the resulting decline in US crude oil stocks to below the 500 million-barrel mark in the last reporting week have clearly prompted a shift in sentiment”, said Carsten Fritsch, analyst at Commerzbank.

While oil rallied this week, prices in NY have lingered below US$50 per barrel amid concerns that elevated global supplies will offset cuts by OPEC and its partners as part of a deal to help rebalance the market. Yet, the decline may not be as severe as OPEC fears-a possibility that would further poke gaping holes into precarious oil-dependent budgets. Markets Friday were supportedfurther by a halt to crude oil exports from Nigeria from Royal Dutch Shell because of circumstances beyond its control. This is the reason I accumulate Total at?42, Chevron at 102, Oxy at 58. OPEC is hoping higher demand in the second half will get rid of excess inventories. The time to be an oil bear is over.

Global oil demand will rise to 97.5 million barrels a day in 2018, a historic high, thanks to demand growth in India, China and Asia’s industrialising “tiger economies”.

The cuts were planned for six months and extended for three.

The writer is a global equities strategist and fund manager.