Oil falls as banks cut price forecasts

Dhaka,  Thu,  24 August 2017
Published : 11 Jul 2017, 21:53:29

Oil falls as banks cut price forecasts

Saudi Aramco to meet Asia demand for August crude in full
LONDON, July 11 (Reuters): Oil prices fell on Tuesday as global oversupply encouraged several banks to cut their forecasts for crude for this year and 2018.

Brent crude LCOc1 was down 50 cents at $46.38 a barrel by 1120 GMT. US crude CLc1 was 50 cents lower at $43.90.

"The fundamental mood has taken a turn for the worse," Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told Reuters Global Oil Forum.

BNP Paribas slashed its forecasts for Brent by $9 to $51 a barrel for 2017 and by $15 to $48 for 2018. Barclays also cut its 2017 and 2018 Brent forecasts to $52 a barrel for both years from $55 and $57 respectively.

Crude prices are about 18 per cent below their 2017 opening levels despite a deal led by the  organisation of the Petroleum Exporting Countries to cut production from January.

OPEC, along with Russia and some other major exporters, has agreed to hold production at about 1.8 million barrels per day (bpd) below levels pumped at the end of last year.

The limits will be maintained until March 2018 in an attempt to drain a global glut, but production elsewhere has risen as OPEC has held back.

US oil production C-OUT-T-EIA has jumped more than 10 per cent over the last year to 9.34 million bpd. Nigeria and Libya, OPEC-members exempt from production limits, have also increased output.

"OPEC has yet to address this increase in production," Goldman Sachs said in a note.

Without a significant fall in oil inventories or a decline in US drilling and production, Goldman said crude prices could fall below $40 per barrel.

Big OPEC members are also under pressure to increase supply to customers, particularly in Asia, which could worsen oversupply.

State oil giant Saudi Aramco will meet customers' full crude oil requirement in India and southeast Asia in August, two sources with knowledge of the matter said on Tuesday.

"There is no (supply) cut" even for heavier grades such as Arab Medium and Heavy crude, one of the sources said.

Gasoline demand tends to increase in the northern hemisphere summer as US drivers take to the road and this has helped support prices in the short term. But further ahead this demand should ease, weakening prices.

Reports from Singapore and New Delhi add: Saudi Aramco will meet the full August crude oil requirements of its customers in India and southeast Asia as well as four of its North Asian buyers, several sources with knowledge of the matter said on Tuesday.

This shows how Saudi Arabia, the world's biggest oil exporter, aims to retain market share in Asia, the region with the world's strongest demand growth.

Saudi Arabia has been cutting exports to Europe and the United States to comply with a production cut deal by the Organisation of the Petroleum Exporting Countries (Opec) and some non-Opec countries such as Russia.

For August, "there is no (supply) cut" even for heavier grades such as Arab Medium and Heavy crude to south Asian customers, one of the sources said.

At least one of the North Asian buyers will also receive full supply of Arab Heavy crude that it has requested. This marks a change from supply cuts to these buyers in the first half this year as Saudi Aramco cut output of cheaper heavy crude to meet its Opec quota.
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