Oil prices hit two-month low on high inventory

Crude oil prices were two-month low early yesterday, on fears that global inventories of crude and the increase in United States rig count could remain high.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $45.05 a barrel, down by $0.19, or 0.4 per cent, in the Globex electronic session.

September Brent crude on London’s ICE Futures exchange fell by $0.24, or 0.5 per cent, to $46.72 a barrel.

Also, Organisation of Petroleum Exporting Countries (OPEC) oil basket’s price stood at $43.36 per barrel on July 18, or $0.12 more than on July 15.

The OPEC Reference Basket (ORB) is made up of the following oil brands: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Rabi Light (Gabon), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

According to the latest OPEC report, the total US rig count, which includes the loss of one gas rig to 89, climbed by 10 to 431 on a monthly average.

The US oil rig count rose for the fourth time in five weeks, adding 11 oil rigs in the week to 1 July and bringing the total count up to 341, according to Baker Hughes’ latest survey.

On a monthly basis, the total US rig count in June increased by 13 rigs m-o-m to 420 rigs, but declined by 452 rigs.

OPEC stated: “Oil rigs were also up by 11 rigs in June compared to a month earlier, all in the Permian Basin. In yearly terms, there was a drop of 303 rigs to 332 rigs in the previous month, of which 187 rigs were in Texas. It seems that producers have increased the number of rigs just to compensate for the heavy declines in crude output seen in April and May 2016”.

The increase in crude oil production in Nigeria is expected to affect the prices of crude oil.

Specifically, the country’s crude oil output increased by 97,000 barrels per day, up from a total of 1.426 million barrels per day that was recorded in April to 1.523 million bpd in June, according to OPEC.

“According to secondary sources, total OPEC-14 crude oil production averaged 32.86 million bpd in June, an increase of 264,000 bpd over the previous month. Crude oil output increased mostly from Nigeria, Iran, Saudi Arabia, Libya and the UAE, while production showed declines in Venezuela and Iraq,” it stated.