For almost three weeks now we have been hammered with bullish sentiments that the market is going to rise, largely in part to crude outages as result of the Canadian wildfires and turmoil in Nigeria. However, as of early this morning it looks like $50/bbl will be harder to reach than was thought last week. Almost all major news sources and analysts are re-focusing on global over-supply, and there are three significant reasons to back it.
Iran has insisted that it will not freeze crude output, they have increased their exports, and affirms their 2 million bbls per day will reach 2.2 by mid-summer. As outlined in the graph below, Iran has in fact been rebuilding its energy industry ever since the sanctions have been lifted. Iran is both producing and exporting at the highest levels since late 2011 when the sanctions were put in place.
Canadian crude oil is also on the rebound. Cooler weather the past six days and a little weekend rain has slowed the fires and two major oil producers have even resumed production. After three weeks of wild infernos, two weeks of which 19 oil producers were shut down, roughly 2,000 square miles burnt to a crisp, and one million bbls/day of crude production lost, there may be light at the end of the tunnel. The evacuation order on seven oil sands producing facilities has been lifted.
Additionally, Libya’s eastern port of Hariga has reopened and since the deal has been made 660,000 bbls of crude has left the port. This will now bring the number of bbls/day back up around 300,000 from the low of 200,000. Global over-supply of oil is undoubtedly the headline.
As of post time, Crude is down $0.41, HO is down $0.0201 and RBOB is up $0.0044.