EMEA News
Crude Up Due to Inventory Drawdowns, But OPEC Efficacy is Required for Bigger Gains: Analyst
Another climb in the roller coaster of crude oil prices occurred Wednesday with West Texas Intermediate settling up 39 cents to $49.56 and Brent rising 55 cents to $52.69 - with the gains this time attributed to the U.S. Department of Energy reporting a crude inventory drop of 6.5 million barrels last week, far more than the expected decrease of 2.7 million barrels.
However, those who take a broader view of the market warn that the inventory draw was entirely expected and not indicative of anything other than a seasonal fluctuation.
David Thompson, executive vice president at Powerhouse, said, "A drop in crude oil imports and another step up in refinery utilization accounts for the bulk of the decline in crude inventories; demand for both gasoline and distillate fuels remains strong but it's worth noting that gasoline demand should be strong at this time of year, and we are drawing closer to the end of summer driving season."
John Kilduff, founding partner at Again Capital, noted, "There's obviously demand and is lending support to prices, [but] we're still in this range that we've been in for a while between $48.50 and $50."
Paul Crovo, an oil and equity analyst at PNC Capital Advisors LLC, pointed out that the way for prices to move higher is for "demand to stay strong, and OPEC has to keep its act together."
Unfortunately with regards to the latter, the Organization of the Petroleum Exporting Countries has once again distinguished itself as a cartel that favours rhetoric over substance, as evidenced by this week's summit at Abu Dhabi.
The meeting was intended to rein in members who were ruining the cartel's crude cutback initiative with rampant overproduction; but although most experts said it was imperative for OPEC to get tough on Libya and Nigeria, instead the cartel emerged from the meeting with the announcement that Iraq, the United Arab Emirates, and Kazakhstan would fully support the cutbacks.
More rhetoric came in the form of Iraq stating it would meet with Saudi Arabia to discuss strategies to achieve OPEC's goal of better compliance; and while on Wednesday Khalid al-Falih, energy minister for the Saudis, confirmed that the meeting had indeed taken place, he limited himself to disclosing only that the two parties had discussed "the importance of uniting the efforts of all countries for market stability."
In the absence of any tangible effort to rein in renegade producers, it's questionable whether any auxiliary counter measure will positively impact global stockpiles - or boost prices: this includes unsubstantiated reports of earlier this week that the Saudis will cut their crude allocations in September by at least 520,000 barrels per day, or a 10 percent reduction in supplies to Asian buyers.
