Global crude oil benchmark, West Texas Intermediate (WTI) and North Sea Brent both failed to maintain their gains made after the OPEC meeting announcement, amid a high level of inventories and higher production. On Monday, OPEC announced that its members will be meeting informally to discuss future outlook due to the recent drop in oil prices on the sideline of the International Energy Agency’s (IEA) biennial meeting in Algeria. On Monday, WTI traded as high as $43.4 and Brent jumped to $45.5 per barrel.
However, by Tuesday evening both of the benchmarks were clearly seen to be struggling to hold onto gains. The very first blow was delivered by American Petroleum Institute’s (API) inventory report that saw biggest gains (2.1 million barrels) in crude inventory in three months. The very next blow came on Wednesday as U.S. Energy Information Administration (EIA) reported more than a million barrels gain. The biggest blow, however, came from Saudi Arabia. Data from the Kingdom submitted to OPEC showed that the biggest exporter in the world is still engaged in a battle for customers and is producing more of its cheap oil to gain that. In July, production rose by 123,000 barrels per day from June to 10.67 million barrels. It is a stark reminder of the words from Saudi Mohammad bin-Salman, who said Saudi Arabia could produce as much as 11 million barrels per day.
The oil price dropped last night. WTI is currently trading at $41.5 per barrel and Brent at $2.4 per barrel premium. We have forecasted that WTI is likely to drop towards $35 per barrel in the near term.