The statement comes despite an actual increase in global supplies: last week, the Energy Information Administration reported a surprise build of 3.3 million barrels in USA stockpiles, which pushed already depressed worldwide prices further down. Overall, oil markets remain well supplied.
But Saudi Arabia's energy minister said Sunday that he is confident that market rebalancing will soon gather steam. Oil prices edged down earlier in the month as a recovery in Libyan and Nigerian output and rising U.S. supplies raised worries about excess supply.
OPEC and non-OPEC allies last month agreed to extend production cuts for a period of nine months until March last week, but stuck to production cuts of 1.8 million bpd agreed in November past year. It has been the world's top producer of petroleum hydrocarbons since 2013, when its production exceeded Saudi Arabia's. US drillers added eight oil rigs last week, bringing the total count to 741, the most since April 2015. Traders and analysts said the recovery looked technical in nature after WTI rallied and encouraged a similar movement in Brent, reports Reuters.
Royal Dutch Shell, The largest operator, last week lifted the force majeure on oil exports from Forcados, one of Nigeria's largest fields, which had been in place for well over a year.
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The U.S. Energy Information Administration, in its monthly Short-Term Energy Outlook report released on June 6 lowered its WTI oil price forecast for 2018 by 2.7 percent to $53.61, premised on higher-than-forecast production.
Asked when oil prices may begin to serve as a drag on markets, Kinahan said, "You start getting to 44.5 and that opens up 40 quickly".
The weakness is particularly visible in the widening price difference between Brent crude for delivery in December 2017 and December 2018 - a popular trade known in the industry as Dec-Red-Dec.
In the short-term, however, the struggling prices of oil has caused the near-term trend to turn bearish on both oil contracts.
Fawad Razaqzada, market analyst at Forex.com, said: "Drilling activity increased for the 21st straight time in the week to June 9, according to Baker Hughes". Russia also has favorable tax regimes and exchange rates (Russian company expenditures are in Russian Rubles, but oil sales are in U.S. Dollars) that resulted in record levels of Russian petroleum production in the second half of 2016.
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