Nigeria postpones decision to join OPEC cuts

Why Energy Is Worst Sector Of 2017

Despite a record drawdown from USA oil inventories and the fact that Saudi exports to the United States are at a 30-year low, the International Energy Agency (IEA) is backtracking its prediction of a global oil market rebalancing because of an increase in OPEC oil production. Prices slumped upon opening but quickly recovered.

According to Gary Ross, global head of oil at PIRA, while the United States will rank in the top ten oil exporters, it is unlikely it will either join OPEC or cut production in an effort to keep prices up, because it simply has no interest in doing so: it strengthens Donald Trump's political agenda of "energy dominance". Its current output is around 1.7 million barrels a day, excluding condensates, Kachikwu said.

OPEC members Libya and Nigeria were exempted from the cuts due to years of unrest that have sapped their output. Saudi Arabia has increased its flows, the IEA said, as well as Libya and Nigeria who are not part of the production freeze.

"OPEC compliance slumped to 78%, the lowest rate this year, and was overtaken by the non-OPEC group whose rate improved to 82%", the IEA said.

Kachikwu expressed the hope that oil prices may stabilise later this month or in August and that conversations with other OPEC members would determine to what extent Nigeria would have to support in stabilising crude prices globally. "Output stood 1.2 mb/d above a year ago with non-OPEC firmly back in growth mode".

Only a handful of OPEC countries are in full compliance with the cartel's agreement to limit crude production, according to the International Energy Agency.

What to watch for in the June jobs report
In June, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $22.03. United States employment rose by more than expected last month, but wage growth remained subdued, latest figures show.

Global inventories also remain persistently high after a modest drop among industrialized nations in May. Stocks were 266 million barrels above the five-year average in May, down from 300 million barrels in April.

"We need to wait a little longer to confirm if the process of rebalancing has actually started in the second quarter", said the IEA, which advises most of the world's major economies on energy policy.

After "lackluster" oil demand growth in the first quarter, "there was a dramatic acceleration" in the second quarter, "due to a combination of expected increases in India, and some surprise additions in the U.S. and Germany", it said. The Paris-based adviser to governments and companies raised its 2017 demand forecast by 100,000 barrels a day, compared with a previous estimate last month.

"Such is the resilience of the USA shale sector that we should be careful to pronounce that its expansion will slow, however it could be that the recent exuberance is being reined in", the IEA's report read.

Exxon Mobil (XOM) shares rose 0.1% in premarket trading on the stock market today.

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