Oil rebounds after major producers announce meeting Oil made a comeback as the OPEC extended an invitation to Libya and Nigeria to join other major oil producers for a meeting in late July.
Both nations had previously been exempted from the recent agreement which capped oil production, and their increased output threatened to disrupt the OPEC cuts. After the rally, however, it came to light that rising oil production in the US was still the main source of worry for investors. The Energy Information Administration published data revealing the oil output in the US had increased from 9.25 million barrels a day to 9.34 million in the space of just one week. Baker Hughes, one of the leading authorities on rig count data, showed that oil producers in the US had added an extra seven rigs to the count. Subdued gains At the end of the US session, Brent and West Texas Intermediate were both trading up 0.4%, with Brent hitting $47 per barrel and WTI slightly under at $44.50 in the aftermath of a near 4% sell-out last week.
Time will tell if the rebound is sustainable, however the International Energy Agency (IEA) recently published a report stating that the oil market has reached a balance and is set to accelerate in the not-too-distant future. The report also predicted that global demand is set to fall for the second consecutive year off the back of subdued gains, and stated that there would be a considerable amount of work required to drain stocks close to the standard five-year average. Supply overhang In an attempt to eradicate the global supply overhang which has seen prices drop below half of their 2014 peak, investors believe that OPEC will continue cutting down oil production when the 13 members of the cartel carry out their meeting.
Previous production cuts have seen the likes of Russia halving their supply, alongside ten other non-OPEC countries. This deal has seen oil prices increase by around 19%, but analysts remain sceptical as to whether the current strategy will provide a long-term solution. Saudi Arabia, the world's biggest exporter, have urged other oil producers to participate in the supply cuts, but this plea has so far been ignored by the likes of Libya and Nigeria. As the industry keeps a close eye on countries that choose to increase their oil output, we await the result of the imminent OPEC meeting with anticipation.
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