By MRIGANKA JAIPURIYAR
After losing 20 per cent of their value in July, ICE Brent and NYMEX WTI rebounded by around 15 per cent in August.
Front-month October Brent settled at US$48.37 a barrel on August 30, up from $42.14 on August 1, and NYMEX WTI settled at $46.35 on August 30, up from $40.84 on August 1. This was driven by a vague possibility that producers inside and outside the Organisation of the Petroleum Exporting Countries (Opec) may cohesively agree to curb output to rebalance the market, though technicals and movements in the US dollar did contribute to the uptick in prices.
Fundamentals, however, remain largely unchanged and are still more skewed on the bearish side. Refined-products stocks remain high; Opec supply is at record-high levels; non-Opec supply has picked up; and against this backdrop, oil-demand growth at best remains stable.
What kicked off the oil-price rally last month was a comment by Saudi Energy Minister Khalid al-Falih that his country was willing to cooperate with other nations “if there is a need to take any action to help the market rebalance”.
ICE Brent and NYMEX WTI hit a two-month high in mid-August at around $51 and $49 a barrel respectively. But Falih undid what he had done by commenting later in the month that intervention was not necessary and the forces of supply and demand should be allowed to do the work.
The thing to keep in mind is that though there has been talk about a meeting on the sidelines of the International Energy Forum (IEF) meeting in Algiers from September 26-28, there is no freeze deal on the table.
Thus freezing production at current levels would appear to have little to no impact on market fundamentals. Meanwhile, stocks remain high.
Looking ahead, movements in the US dollar have exerted considerable influence over oil prices in the past few weeks and this is likely to continue.
Mriganka Jaipuriyar is associate editorial director, Asia & Middle East Oil News & Analysis.