The Bunker Review is contributed by Marine Bunker Exchange
On Thursday the oil market seems to be steady after wild swings this week. It looks like $50 a barrel for Brent and $46 for WTI could be an acceptable average for the market for a while.
As we are approaching the autumn and colder weather and low oil prices have encouraged the individual to use more oil. Oil dependent businesses are using more oil but are these increases enough to reduce the oversupply of crude oil? - The global market is stacked with crude oil, which will take a long time to consume. We are probably talking of years and plus the oversupply still exists unchanged.
Oil prices plunged to a six-year low last month as OPEC kept its taps open in an effort to pressure competitors such as U.S. shale drillers to cut production. Saudi Arabia, Kuwait, Qatar and the United Arab Emirates overcame opposition from Iran and the group’s seven other members last November to adopt that strategy. OPEC has since lost billions of dollars in revenue, pushing some members to the brink of economic crisis and prompting calls from Algeria and Venezuela for a change in policy. -Should OPEC focus on prices or stability of the oil market?
While most OPEC members would like to see crude prices at $70 to $80 a barrel, oil’s slump below $40 a barrel last month in New York hasn’t tempered Iran’s plan to restore output within months of sanctions being lifted, Zanganeh said. Iran and six global powers reached an agreement in July that would limit the Persian Gulf country’s nuclear program in return for removing sanctions on its energy and financial industries.
The U.S., Canada, Brazil and Russia -- the biggest sources of supplies outside OPEC -- face an array of technological and regulatory obstacles that will be compounded by the drop in crude prices, according to a preliminary draft of the long-term strategy report obtained by Bloomberg News. Some smaller U.S. shale drillers could be forced “out of business,” Brazil will face “extreme technological challenges,” and Russia’s best hope may be to prevent output declining, it said.
If the overproduction continues like today, the longer it takes to return the oil market to a healthy supply and demand situation like before. It is in the hands of OPEC, USA and Russia.
For next week we expect less volatile market, but the general trend is still downward despite the rallies.
* MGO LS
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)