Global oil benchmark, Brent crude, is being pressured by rising supply of light, sweet crude from Nigeria and Libya as well as offers of North Sea crude from floating storage, the Organisation of Petroleum Exporting Countries has said.
OPEC, in its Monthly Oil Market Report for July released on Wednesday, said a rebound in Libyan and Nigerian production added pressure to already amply supplied Atlantic Basin due to a massive increase in the US shale oil production.
It said demand from Asia was weaker on account of upcoming refinery maintenance and unfavourable arbitrage economics.
“The prospect of increased supply also put some pressure on prices. Nigerian Forcados production ramped up quickly after it resumed in May, increasing to 250,000bpd, creating an overhang as supply surpassed demand. Floating storage also increased amid continuing oversupply in the crude market,” the oil cartel said in the report.
It said volumes of oil stored at sea were increasing not only around Singapore, but also in the North Sea, with ship-tracking sources indicating a build-up of floating barrels of around seven million barrels to nine million barrels.
OPEC said, “The ICE Brent/NYMEX WTI spread narrowed on successive weeks of the US crude stock draws. Ample light sweet crudes supplies from increasing production in Libya and Nigeria as well as floating storage in the Atlantic Basin has pressured the European benchmark relative to that of the US.
“North Sea light sweet Brent was pressured on plentiful supply. An increasing supply of light, sweet crude from Libya and Nigeria and offers of North Sea crude from floating storage amid limited demand from Asia for North Sea crude have been weighing on Brent prices.”
According to secondary sources, total OPEC-14 crude oil production averaged 32.61 million bpd in June, an increase of 393,000 bpd over the previous month.
“Crude oil output increased mostly in Libya, Nigeria, Angola, Iraq and Saudi Arabia, while production showed declines in Venezuela,” the group said.
Crude oil production from Nigeria increased to 1.663 million bpd in June from 1.494 million bpd in May, based on direct communication, according to the report.
In an interview with Bloomberg on Wednesday, the Secretary-General, OPEC, Mr. Mohammad Barkindo, said when OPEC met in September last year, they decided to give Libya and Nigeria special considerations in the permutations that led to the Algiers Accord.
He said for the first time, OPEC came up with a range of a production ceiling of 32.5 to 33 million bpd, making provision for the expected recovery of production from the two countries, including Iran.
“We are glad that these countries are recovering fast. OPEC did that in solidarity with fellow member countries that were facing severe challenges in their countries. And within the context of the current extended declaration of cooperation, OPEC decided to continue to support these countries to restore their capacity and to come back fully into the market,” he added.
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