Oil prices post more gains as Saudi Arabia export to U.S. drop to 524,000 bpd



Oil prices posted more gains last week, as the EIA reported deeper inventory reductions with Brent briefly traded above $50 per barrel for the first time in nearly two months on Thursday. There is a bit more confidence in the oil market than a few weeks ago, although there are questions about the potential upside from here. U.S. oil production jumped again, putting output above 9.4 mb/d, which, along with fears of rising OPEC production, pushed oil down during early trading on Friday.
OPEC members are meeting this week to monitor the progress of their production cuts, but analysts see little chance that they will take more aggressive action to balance the market.  According  to Oilprice .com,deeper cuts would require more sacrifice and merely open up more market share for U.S. shale, while abandoning the collective output cuts would surely lead to another slide in prices. “They’re between a rock and a hard place,” Mike Wittner, head of oil market research at Societe Generale SA, told Bloomberg. “The bottom line is, it hasn’t worked.” Nevertheless, a report from Petroleum Policy Intelligence says that Saudi Arabia is considering unilateral cuts. Exports will probably drop by 600,000 bpd this summer as domestic consumption ramps up, but Riyadh is considering cuts on the order of 1 mb/d.
However  new data from Petro-Logistics estimates OPEC production rising in July, further evidence of a weakening compliance rate for the cartel. The consultancy forecasts production rising by 145,000 bpd this month, pushing combined output above 33 million barrels per day. The production gains come from Saudi Arabia, the UAE and Nigeria. Oil prices appeared to fall on the news on Friday.
The U.S. imports of Saudi crude plunged to just 524,000 bpd for the week ending on July 14, the lowest figure in seven years. The prior four-week period saw Saudi crude oil exports to the U.S. average at 810,000 bpd. Saudi Arabia has intentionally sought to reduce exports to the U.S. in an effort to drain high levels of inventories. The U.S. has some of the most transparent and clear data on crude stocks, which means it plays an outsized role on the oil prices. By slashing exports to the U.S., Saudi Arabia hopes inventories will decline faster, creating a bullish mood in the oil market.

Olusola Bello, With agency report