Crude oil prices hovered above a four-month low on Thursday, recovering slightly from last Wednesday losses as increased United States inventories and rising global output dampened efforts by the Organisation of Petroleum Exporting Countries (OPEC) to curb the glut in the international market.
As part of efforts to improve compliance to the January 1, 2017 deal by OPEC and non-OPEC countries to curb global output by 1.8 million barrels per day, some oil ministers from the two groups will meet on Sunday in Kuwait to discuss compliance.
Global benchmark Brent crude oil was trading on Thursday at $50.49 a barrel, above last Wednesday’s slide to $49.71, its lowest level since November 30 when OPEC announced plans to cut output.
The United States West Texas Intermediate (WTI) light crude oil slipped 18 cents at $47.86.
Brent has remained well below this year’s high above $58 per barrel, reached shortly after January 1 when the deal between OPEC and non-OPEC states to curb supplies came into effect.
Nigeria’s Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said that the current fluctuations in oil prices pose no immediate threat to Nigeria’s economic recovery, saying it would amount to being an alarmist to consider the gyrations in the oil market a threat to the Nigerian economy.
Reuters reported that OPEC has broadly met its commitments to reduce output, but non-OPEC producers have yet to fully deliver on pledged cuts and US shale oil producers have been pumping more oil after crude prices recovered from last year’s drop below $30.
Kachikwu had hinted that members of OPEC were already exploring opportunities to engage US oil producers on efforts to stabilise prices.
OPEC SET TO HAVE A MEETING WITH NON-MEMBERS
As global stockpiles rise even with OPEC-led cuts, oil ministers from OPEC and some non-OPEC members will meet next Sunday in Kuwait to discuss compliance with the January 1 agreement.
Data from the US Energy Information Administration showed US inventories jumped by a bigger-than-expected five million barrels last week to 533.1 million.
However, London-based Barclays Bank offered a more upbeat outlook, saying the latest oil price weakness would not last into the second quarter. The bank forecast a modest price recovery.
“We see a rebound to the high $50 and $60 range in Q2 as inventories draw and the market readies for the peak driving and demand season,” the bank wrote in a note to clients, which was seen by Reuters.
The bank said inventories held by industrialised nations would be eroded by the end of the second quarter, sliding to OPEC’s targeted level of the five-year average.
But the Energy Information Administration (EIA) said US inventories climbed almost 5 million barrels to a record 533.1 million last week, thus outpacing forecasts of a 2.8 million-barrel build.
The high inventories is coming as US oil production has risen over eight per cent since mid-2016 to more than 9.13 million barrels per day (bpd) to levels comparable in late 2014, when the oil market slump started.
There were also strong indications of a bloated market in Asia, where China’s fuel imports slumped, while its refiners sent huge volumes overseas as they refine more fuel than the domestic market can absorb.
China’s fuel exports reportedly hit the second highest on record in February, up 76.6 per cent over a year earlier at 1.06 million tonnes, data from the Chinese customs showed on Thursday. Diesel exports last month surged 66.7 per cent on year at 1.32 million tonnes.
Reuters reported that China imported 7,245 tonnes of gasoline in February, tumbling 94 per cent from the same period in 2016, while diesel imports dropped 52 per cent from a year ago to 50,000 tonnes.