Recent data points suggest that rebalancing in the global oil market is speeding up, as oil posted its best weekly gain this past week (up 8.6% to $49.71). Notably, U.S. crude and gasoline inventories fell much more steeply than expected this past week (7.2 million barrel drop) and the world's biggest oil exporter Saudi Arabia said it would further reduce oil output in August. At the OPEC meeting this past Monday in Russia, which included some non-OPEC producers, Saudi Arabia announced it would cut August exports to 6.6 million barrels a day, which would be a million less than a year earlier. Saudi Arabia, the world’s biggest crude exporter, typically rolls back shipments in the summer as domestic demand peaks, though a shipment cut of that size should notably expedite market rebalancing. Nigeria, which has been exempt from this year’s OPEC-led production-cut deal, vowed to keep daily production at no greater than 1.8 million barrels. The cartel’s latest data put the country’s output at 1.64 million.
Finally, Baker Hughes reported on Friday that the number of oil rigs operating in the U.S. rose by just 2 to a total of 766 last week. The rig count has risen fairly steadily for more than a year, but the growth has recently moderated. With signs that this year’s shale upswing may be ebbing, combined with increased OPEC compliance/measures and strong Chinese demand, oil prices could be setting up for a strong back half of the year. As the oil price funk is now into year three, amid a persistent supply glut, a speedier rebalancing in the oil markets in H2/17 will be cheered by many market watchers.
A Canadian Energy expert