Oil prices expected to be kept erratic as Russia, Iran and Libya all point out increasing output.

Oil prices expected to be kept erratic as Russia, Iran and Libya all point out increasing output.
Oil prices expected to be kept erratic as Russia, Iran and Libya all point out increasing output.
Tuesday July 26, 2016

After reaching a two-month low on Wednesday, crude went back into positive sign with an increase of 1 percent, with nine consecutive weeks of inventory draws said to be easing concerns about the persistent market glut.

An analyst pointed out that even though the demand for oil is not looking as bright as it was at the beginning of the year, the force to increase production is still the apparent trend for global producers, if the latest new from Russia, Iran, and Libya is any indication.

A government official from Russia said that there were no conversations about possible coordination with the Organization of the Petroleum Exporting Countries (OPEC) after coming to nothing for jointly maintain production levels earlier this year. As the cut of the production cannot be agreed as there are not such tools and mechanisms for this.

Domestic oil output expected to be as much as 544 million tons this year after reaching a 30-year high of 534 million tons in 2015, and prices could be lower than the prediction of $40-$50 in 2016, due to seasonal decline in demand (it is believed that the global market will re-balance by mid-or end-2107 depending on what action Saudi Arabia takes).

Meanwhile it is expected that Iran will increase the day output 8.5 million per day from its Isfahan Oil Refinery, according to local media, due to 2 billion US dollars in production improvements, made likely by a deal between the Islamic Republic, and South Korea’s Daelim Company. This four-year project will fetch the 36-year-old facility back to its glory days.

On the other hand in Libya, oil exports from its eastern terminal of Hariga have started again following the end of a pay protest by guards. Even though other Libyan remain closed, it was stated that if the terminals re-open, it will mean a couple hundred thousand additional barrels on the market that would be another leg lower in term of prices.

While most analysts claim that the rest of 2106 will be erratic in terms of price swings, it is expected that the supply and demand picture will improve in the latter half of 2016, with prices in the mid-$50s by the end of the year.


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