Oil Prices Rebound As Saudis Expect Reduced Exports In August

Devin Lawrence
July 21, 2018

Oil prices rose today after Saudi Arabia " s oil cartel OPEC governor Adeeb Al-Aama said the kingdom " s crude exports will fall by about 100,000 barrels per day (bpd) in August, over-shadowing market pressure from a rising dollar and record high United States crude production.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat-to-higher during the pre-market session Friday.

Brent for September settlement advanced 74 cents to $73.69 on the London-based ICE Futures Europe exchange.

He also said concerns that Saudi Arabia and its partners are moving to substantially oversupply the market are "without basis".

To be sure, the roller coaster that crude prices have been on for the past decade has been hard on oil exporters and oil importers alike.

Expectations of a dramatic influx of product from Saudi Arabia and Russian Federation has been one of the main bearish drivers of crude prices this week, alongside what continues to be robust gains in United States supply. Korean companies have been adjusting their crude oil import volume in line with changing relations between Iran and the U.S. Korea that depends on imports for nearly all of its crude oil supply had purchased less than 5 percent of its total needs from Iran between 2012 and 2015 due to the sanctions.

Distillate fuels stockpiles, which include diesel and heating oil, rose by 1.7 million barrels, compared with expectations for an 873,000-barrel gain, the data showed.

The impact of USA sanctions on Iran's oil shipments, which remains highly uncertain, will play a big part in determining the final outcome.

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USA crude stocks surprised the market and rose by 5.8 million barrels last week as oil production hit 11 million barrels a day (MMBPD) for the first time ever, the Energy Information Administration said Wednesday.

"The dollar was a one-way ticket for the last couple of weeks and basically reversed directions, giving us some strong support", said Phil Flynn, analyst at Price Futures Group.

Goldman still thinks that Brent could retest the $80 a barrel market, but only late this year, instead of in the summer, depending on USA oil policies.

Saudi Arabia initially planned to reach record output of 10.8 million barrels a day this month, people briefed on production policy said late last month.

OPEC's commitment in June was to bring compliance to the OPEC production cut deal closer to 100%-which would equate to about a 1 million bpd increase in production.

"It was not long ago that the Saudis said they would make sure that there is adequate oil supply in the market, and now they are trying to reassure those who think they could oversupply the market", ING analysts said in a morning note.

Adeeb al-Aama said in a statement on Thursday that the kingdom's July crude oil exports will be roughly in line with last month's total, which stood at almost 500,000 barrels per day (bpd).

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