REUTERS/Danish Siddiqui/Files
The field day that the bulls had on Monday was reversed to a certain extent due to an immediate rally last night riding on the back of a move by many investors to take profits because e of the belief that the September of the World Oil cartel will result in imposition of a reversal of the production freeze.
However, the rally was quite slow and the crude futures that is due for delivery in September was trading at $43 per barrel due to a minor decrease of 2 cents that is equal to a 0.1% fall; the story was the same at the London Exchange of ICE Futures for the Brent Crude that is due for delivery in October, it slipped by 7 cents which translates into a downward movement by 0.2% while being traded at $ 45.32 per barrel.
Meanwhile there was an important announcement by Mohammed bin Saleh al Sada, the Energy Minister for Qatar who is also the President of the Organization of the Petroleum Exporting Countries (OPEC) has decided that there will be a full-fledged meeting of the 14 members of OPEC at Algeria; the informal meet will be held on the sidelines of the International Energy Forum there and the meeting will be between September 26 to September 28.
According to Sada, there is going to be an enhanced demand for crude oil during the later part of the current year while the availability of crude will be inadequate in the second half; the combination of these two factors indicate that the current bearish trend is likely to last for a very short with an expectation of the oil prices rising in that period.
There is thinking among several members of the OPEC wherein they are pitching for a revision of the limits of production; this subject was broached at the Doha meet of the OPEC when they last met in April but the proposal was nipped in the bud due to the views expressed by Saudi Arabia and Iran.
The view expressed by Saudi Arabia was that there was going to be a realignment of the demand-supply equation and that the market forces would be themselves creating a proper balance of the rates; Iran was also defiant in its insistence that it will not curtail production and their target was to reach the pre-sanctions level of production.
Hence, the idea was shelved in April but September is another meet and the remaining members who are in favor of rethinking the limits of crude production during the year ending and beyond would certainly like to have their say.
It may be mentioned here that the Iranian Oil wells have been producing oil with a vengeance ever since the sanctions against them were lifted in January; they have increased their daily production of crude oil from 3 million dollars a day to a high of 3.6 million barrels per day; the ultimate aim of the Iran authorities is to raise its production to a high of about 4.2 million barrels per day gradually. That was the level of production that they wish to achieve before even contemplating any before they would even think of introducing some controls.
This announce of a meeting in late September this year has made a lot of difference to investors who were disappointed with the Chinese imports of crude oil plummeting during the past six months; July was the pits with China’s crude oil imports registering their lowest level.
See against the disappointing oil prices during the last two years, the news of an upcoming meeting of OPEC means that there is some ray of spark that things might be changing for the better.
The outlook seems to be encouraging according to Tim Evans of Citi Energy Futures who opined that there are good possibilities that may emerge but much will depend on the amount of cooperation that Saudi Arabia will offer; all earlier proposals for production freezes were nullified by the Saudis.
But, skeptical analysts are convinced that, even this time around, nothing concrete is likely to emerge since they did not take advantage of the lower prices of oil in the recent past; that was the widow of opportunity.
Vivek Dhar, a commodities strategist at the Commonwealth Bank of Australia hit the nail on the head when he remarked that the OPEC members resorted to less of action and more of talk.
According to the S & P Global Platts, analysts are gearing up to keep a close watch on crude and gasoline stock movements of the U.S. since their production fell by 1.75 million barrels 1.6 million barrels respectively.
This is a big drop.
Umrao Singh umraoz.wordpress.com
Written for: Lars-Magnus Carlsson www.thephilippinepride.com?utm_source=rss&utm_medium=rss
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