Finance

Oil price recovers, but market is 'on borrowed time'

Oil price recovers, but market is 'on borrowed time'

India is the latest Asian country to buy United States crude after South Korea, Japan, China, Thailand, Australia and Taiwan after the OPEC cuts drove up prices of Middle East heavy-sour crude, or grades with a high sulphur content.

The French bank said that the rising output from Nigeria and Libya eroded 40% of the 1.25m barrels per day cut by other OPEC members since the beginning of the year.

Joe Cusick, financial advisor for The Cusick Group, agrees that better than expected GDP data from Asia is helping crude, and he also believes the weak us dollar "has really helped the commodity space and specifically oil".

While OPEC-led cuts have offered prices some support, rising supplies from Nigeria along with Libya, two OPEC states exempt from the pact, and increasing USA production have weighed on the market.

A report emailed from S&P Global Platts said the price spread between short-term and long-term oil contracts is shrinking, which removes the financial incentive for traders to keep oil barrels locked in storage.

EIA releases weekly data Wednesday.

Oil slid in NY as the market searches for more evidence that Organization of the Petroleum Exporting Countries's (Opec) cuts are working.

It is also not certain whether the country would still be able to meet its target of 1.8 million barrels per day, by next month, with the shutting down of the pipeline.

On the other hand, worries over OPEC compliance, rising Libyan and Nigerian production, and US shale production growth will likely keep the pace of total global storage re-balancing, as well as sentiment, in check.

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First of all, July 7th's report took US inventories below 500 million barrels for the first time since January 27th's report.

West Texas Intermediate (WTI) for August delivery fell 52 cents to settle at $46.02 a barrel on the New York Mercantile Exchange.

Output cuts from producing countries coordinated by OPEC have been stymied by rising output from Libya and Nigeria, which are exempt.

Traders will be paying close attention to USA inventories data. If confirmed, it would be first increase after two weeks of decline.

USA crude stocks rose last week, adding 1.6 million barrels in the week to July 14 to 497.2 million barrels, industry group the American Petroleum Institute said late yesterday.

Opec's implementation of output cuts slipped to 92 percent in June, from 110 percent in May, according to a person familiar with the matter.

Many analysts believe that oil will not reach pre-slump highs again for several years, and some are starting to question whether it ever will. Prices gained US$2.31 to US$46.54 a barrel last week.

"There seems to be little hope of redistribution (market) ... unless we have seen a significant increase in demand to reduce supply constraints", said Sukrit Vijayakar, Energy Counselor Trifecta.

India's reliance on Middle East oil imports shrunk in June to the smallest since October 2015 as the world's third-biggest importer tapped other sources amid OPEC supply cuts, ship tracking data from industry sources and data available on Thomson Reuters Eikon showed. Exports of refined oil products in May fell to 1.279 million bpd, from 1.455 million bpd the month before, the data showed.