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Higher Supply From OPEC, Russia Sees A Drop In Global Oil Prices

Higher Supply From OPEC, Russia Sees A Drop In Global Oil Prices
Oil prices slowed down and dropped in the first week of August noting its fourth drop in the last five weeks.
In the week, there was a decrease of 0.75 percent and 2.10 percent in the price of the West Texas Intermediate (WTI) for September delivery and Brent for October delivery respectively.
The potential impact of US sanctions on Iran and the consequent supply constraints and the some supply side disruptions had driven oil prices high at the beginning of last week. on the other hand, the market is also being impacted by the production of Syncrude Canada's offline on its sands facility.
Last Monday, there was an increase of 1.62 percent in the WTI for September at 70.13 dollars a barrel on the New York Mercantile Exchange. ICE Futures Europe noted a 1.03 percent increase in Brent crude for October delivery at 75.55 dollars per barrel.
Power outage had resulted in production getting offline for at least through July at the oil sands facility near Fort McMurray, Alberta of Syncrude Canada which is amongst the largest producers of synthetic crude oil from oil sands in the world and the largest single producer source in Canada.
About 10 per cent of the Canadian crude oil supply is accounted for by Syncrude Canada's nameplate capacity. The energy hub inventories at Cushing in the U.S. state of Oklahoma reached extremely low levels because of reduction of flow of crude to the plant from the company. 
Cushing is a famous price settlement point for WTI on the New York Mercantile Exchange and is a major trading hub for crude oil.
There has been a decline of 50 percent in the crude oil inventories at Cushing since beginning of the year.
A buildup of 3.8 million barrels in commercial crude oil inventories, reported the U.S. Energy Information Administration on Wednesday. This was primarily because of lower exports of about 9.6 million barrels for the week ending July 27 compared to the week earlier while imports had bene maintained at the same levels through the two weeks.
The global oil price movement is influenced by the U.S. net imports of crude oil.  During that week, there was a net import increase of 1.35 million barrels per day by the U.S.
Anas Alhajji, an energy economist based in Dallas, Texas, said: "Unlike the past, U.S. weekly crude oil inventories have become extremely sensitive to U.S. net imports, making short term oil prices more volatile."
During the week ending July, there was a decline in the U.S. oil production at 10.9 million barrels per day, the EIA also reported on Wednesday. The production had hit a record of 11 million barrels per day.
Alhajji said "The July production numbers show a large increase in OPEC production close to 300,000 barrels per day, but exports increased only slightly, preventing prices from declining further."
"While the increase in OPEC production raises questions about the size of the remaining production capacity, people should remember that most of the decline in Venezuelan and Iranian production is already priced in."
On the other hand, the outcome of an increase of output by OPEC and Russia by almost 500,000 barrels per day in July resulted in the narrowing of the price differential between WTI and Brent.

Christopher J. Mitchell

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