Oil prices build on rebound amid production-cap talk for Libya, Nigeria

Oil prices build on rebound amid production-cap talk for Libya, Nigeria

Oil prices build on rebound amid production-cap talk for Libya, Nigeria

The war between OPEC and US shale drillers is killing older oil fields at the fastest pace in 25 years - which could hurt the industry once the current oil glut has faded, consulting firm Rystad Energy believes. Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest United States oil-storage hub, probably dropped by 1.4 million barrels last week, according to a forecast compiled by Bloomberg.

U.S. crude stockpiles probably fell by 2.85 million barrels last week, a Bloomberg survey showed before an Energy Information Administration report tomorrow.

There are signs of resurfacing of problems in the Niger Delta that could once again cut the Nigerian production of 1.5 million barrels by half. Pushback from Nigeria and Libya to continue exemptions is expected to be strong, said Tim Evans, a Citi Futures analyst.

By not cutting deeper, Saudi Arabia may be serving its other objectives, particularly as the country grows increasingly wary of giving any more price support to the resurgent USA shale-oil industry, said Helima Croft, head of commodity strategy at RBC Capital Markets.

Brent crude was down 24 cents at $46.64 per barrel, while US West Texas Intermediate was at $44.21.

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Kuwait said on Sunday that Nigeria and Libya had been invited to the meeting and their production could be capped earlier than November, when OPEC is scheduled to hold formal talks, according to Bloomberg.

Meanwhile, Asian docks could be holding as many as 50 very large crude carriers (VLCC), each carrying up to 2 million barrels of oil, as of last month, as traders hold increasingly high volumes of oil in the wake of a 10 percent fall in oil prices since late May. By 2020, USA crude exports could reach 2.25 million barrels a day, four times the 2016 daily average of 520,000 barrels a day.

The two countries' combined output is now some 380,000 barrels per day above October levels, the month which OPEC used as a benchmark to base its production cuts.

If Libya and Nigeria are able to stabilise their output at current levels, they will be asked to cap supply as soon as possible, Almarzouq added.

Nigeria's finance minister met last week with OPEC Secretary General Mohammad Barkindo. While stockpiles in the industrialized world have fallen, they remained 292 million barrels above the five-year average in April, according to the International Energy Agency. The French bank cut its forecasts for Brent by $9 to $51 a barrel for 2017 and by $15 to $48 for 2018.

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