On Friday (July 21), the European market was in an early trading session. The oil price fluctuated within a narrow range. Brent crude oil was below $50 a barrel. It broke through the standard for a short time yesterday and was first seen in six weeks. Major oil producers will hold important meetings next week.
On the previous trading day, oil and US crude oil rose to the highest level since the beginning of June in shock trading, as data showed that US crude oil and fuel inventories fell sharply last week.
ANZ said in its research report: "The factor of a significant reduction in inventories announced earlier this week is still affecting the market."
Ric Spooner, chief market analyst at CMC Markets, said that stocks may continue to decline in the near term, but overall inventory levels are expected to be higher than 2016.
Despite the reduction in inventories, the US 490 million barrels of oil inventories are still well above the five-year average, and US crude oil production has increased by nearly 12% to 9.4 million barrels per day compared to mid-2016.
Although OPEC has reached a production reduction agreement with 10 other oil-producing countries, oil prices have fallen into a bear market, and crude oil inventories have remained high. As Libya and Nigeria increase their supply to compensate for lost production, the implementation of the production reduction agreement is also faltering.
Ample global supply puts pressure on oil prices, and major members of the Organization of Petroleum Exporting Countries (OPEC) are scheduled to discuss market conditions with non-member Russia in St. Petersburg next Monday (July 24) and whether more action is needed to support oil prices.
Spooner said, "The general view of the market is that there will be no change."
If OPEC abandons the production reduction agreement and starts to increase production, then further decline in oil prices will bring even greater disaster to its economy. Increasing production cuts may boost oil prices, but that will lead to more US shale oil flowing into the international market.
"They are now in a dilemma," said Mike Wittner, head of crude oil market research at Societe Generale. "In the final analysis, production cuts have not worked. If they further reduce production, the more they want to support oil prices, the more support they will provide to the US."
At 15:43 Beijing time, Brent crude oil futures prices rose 0.28% to $49.42 per barrel; US crude oil futures prices rose 0.17% to $47.00 per barrel.
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