Oil edges up but set for worst H1 performance in 20 years

"We remain of the view that inventories will [decline in the second half of the year], but empirical evidence of this is likely necessary for oil prices to inflect into an upward trend".

Downward evolution has all the chances to be extended as US shale drillers continue to add rigs, and Libya and Nigeria ramp up production, undermining their fellow OPEC members' efforts to reduce output and support prices. During President Trump's visit to Saudi Arabia in May 2017, Saudi Aramco signed deals with 11 US companies valued at $50 billion - Honeywell (NYSE:HON), Nabors Industries, Exxon (NYSE:XOM), Lockheed Martin (NYSE:LMT), General Electric (NYSE:GE), Halliburton (HLB), Baker Hughes (NYSE:BHI) and National Oilwell Varco (NYSE:NOV).

Republicans were due to release details of a bill aimed at overhauling US healthcare law on Thursday and a vote could come as soon as next week, several senators told Reuters. The initial deal was agreed for six months, which in the Month of May was extended for another nine months until March 2018.

He said, "OPEC has been much more successful managing sentiment than supply".

A decline in inventories would be seen as a good sign for oil prices stabilizing - or even rising - as low prices have been blamed on a glut of supply.

Thanks largely to shale drillers, USA oil production has risen by more than 10% over the a year ago to 9.35 million bpd. The IEA expects USA oil production could end 2017 up 920,000 bpd from a year earlier and could grow by another 780,000 bpd in 2018.

So, what next for the oil price? However, the industry might not get that far because they could push down prices this year, which could potentially slow down ambitious production plans.

By June 21, December 2017 futures were trading at a discount of $2.69, a shift in the spread of more than $3.50 per barrel in less than a month (http://tmsnrt.rs/2stKbak). All in all oil in floating storage has been building at a rate of about 800,000 barrels a day since early May and continues to increase. In 2005, OPEC members produced about 30 million barrels a day, on average, representing 38.5% of total output.

They argue that OPEC's strategy will just take more time to work. And Libya has increased its oil exports.

Russian compliance with the first round of cuts was slow, and there is skepticism that Moscow will offer aggressive compliance this time although Russian news has reported companies have successfully cut 300,000 bpd. Two key brokers who helped members such as Saudi Arabia and Iran overcome their differences to bring about the first deal are now out of the picture: Algeria's oil minister was dismissed as part of a cabinet reshuffle; Qatar is under a regional blockade imposed by Saudi Arabia as a punishment for its ties to Iran.

At the individual stock level, Italys ENI and China's CNOOC (or the China National Offshore Oil Corporation) are the biggest losers amongst the major producers: down by -11.90% and -11.10% YTD respectively.

  • Zachary Reyes