Oman crude oil prices on the Dubai Mercantile Exchange rallied strongly last month as hopes of an agreement among major producers to curtail output underpinned prices.
However, uncertainty surrounding the details of any such agreement led to some retracement going into this month.
Opec ministers plan on discussing the oil market and output on the sidelines of the International Energy Forum taking place in Algiers from September 26 through 28, where leading producers are expected to seek to revive a global output freeze deal and rebalance the global market.
However, a similar deal in April failed to go through because of tensions between Iran and Saudi Arabia.
The monthly average price of the DME for August, which is used by Oman and Dubai to set their official selling price, was US$44.02 per barrel for October loading, up 62 cents per barrel from the July average of $43.40.
However, in terms of price movement over the course of the month, Oman crude rallied from about $40 to close the month just above $45.
The price increase included a six-day winning streak that added more than $6 to oil prices – the longest run of consecutive gains this year.
While the low prices of 2015-16 have had a dramatic impact on new oil finds as exploration companies slash budgets for upstream projects, concerns that the market is oversupplied going into next year continue to keep a lid on prices. In particular the high stock levels, especially in the United States, continue to dampen the chances of any significant price recovery.
Reuters reported that Saudi Arabia increased production in June and July to record levels, in part to meet a seasonal rise in domestic demand but also to cover export requirements.
In July it pumped 10.6 million barrels per day, the most in its history, said the report. Iranian export volumes continue to recover following the easing of sanctions, while Iraq’s production is on the up again following recent logistical issues.
A number of Middle East producers have voiced support for an agreement to balance the market through curbing production increases, as Opec members in general adjust to the realities of lower prices.
A report from the US Energy Information Administration estimated that Opec earned $404 billion in net oil export revenue last year – the lowest levels since 2004. This, according to the report, shows a 46 per cent decline in revenue when compared to the same figure from 2014, when the 12-member bloc earned $753bn.
Oman crude prices averaged $51.22 last year, tumbling from $96.96 in 2014, which in turn followed three years of annual prices averaging comfortably above $100. In the first eight months of this year Oman prices averaged $39.12 – setting the market on course for the lowest annual average since 2003.
A recent report from IHS Markit, a market leader in upstream oil and gas information, noted that volumes for conventional oil and gas discoveries made outside of North America have declined for multiple years. It noted that “just 12 billion barrels of oil equivalent estimated recoverable resources were discovered in 2015” – a low not reached since 1952.
Paul Young is the head of energy products at DME.
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