The negative factors influencing the oil price outweigh the positives, resulting in a 1% decline in crude oil prices.
The news of the Greek bailout package, which looks good at first glance, still leaves more questions than answers as to the future of the Greek economy. The mere fact that there appears to be some light at the end of the long eurozone/Greece tunnel provides sufficient positives for analysts to see growth in European energy demands. This offered a degree of support for oil prices.
The other positive comes out of the July monthly oil report issued by OPEC which forecasts an increase in oil demand in 2015 to a total of 92.50 million barrels per day over the 2014 figure of 91.32 mb/d. With the exception of Europe and the Asia Pacific area, OPEC forecasts growth throughout the rest of the world’s regions. The news of the Greek settlement could well result in the forecast for Europe turning positive in the next monthly report.
The expected drop in shale oil production in the U.S. of 91,000 barrels per day for August, as forecast in the Energy Information Administration report for July, provided some additional support for the oil price.
Meanwhile, reports that an agreement between Iran and the P5 + 1 countries on the Iranian nuclear ambitions, which have the lifting of economic sanctions on Iran as a key element to any compromise, are exerting downward pressure on the oil price. There is no certainty as to how long it will take for sanctions to be lifted or how long it will take Iran to ramp up its oil production in the event sanctions are lifted. The apparent determination to do a deal, evident from the U.S. negotiating team led by Secretary of State John Kerry, could result in the sanctions being lifted sooner rather than later, as demanded by the Iranians.
The OPEC report indicated an increase in monthly oil production of 283,000 barrels per day by its members. This increase is in the face of a drop in the demand expectations for OPEC crude for the rest of 2015 by 100,000 barrels per day. The increased supply, together with a lower demand, placed further pressure on the oil price.
Commenting on the major OPEC producer Saudi Arabia, Naeem Aslam, chief market analyst at Ava Trade said, “It seems as if Saudi Arabia is completely out of sync with the reality and wants to pump as much oil as they can to help their budget deficit situation.”
Adding to this, Chinese oil imports dropped by 6.7% in June from the June 2014 figure amid Chinese expectations of a turnaround in the second half of 2015, with improved growth forecasts.
On the NYMEX, August West Texas Intermediate crude (CLQ5, -1.3%) closed at $52.20 per barrel, down by 1% after trading at an earlier low of $51.26.
Meanwhile, Brent Crude for August delivery (LCOQ5, -0.88%) dropped by 88 cents, or 1.5%, to $57.85 per barrel on the London Futures Exchange.