As always — oil is on the move, and, the see-saw continues. One factor after the other continues to appear on the crude horizon, impacting the global energy dynamics.

There seems a growing support to extend the Opec-led production cuts. Saudi Arabia is in the lead again — underlining the need to extend the output cut beyond March 2018. Iraq and Kuwait also appear lending support, publicly, to the move.

In recent days, Saudi Arabia’s powerful crown prince, Mohammed bin Salman, has backed the extension of the crude output cut arrangement.

“The kingdom affirms its readiness to extend the production cut agreement, which proved its feasibility by rebalancing supply and demand,” the crown prince said in a statement.

Strong assurances from other key Opec members and Russia regarding the extension of the production cut deal has pushed oil prices above $60 per barrel, for the first time since 2015.

Other factors also appear providing support to the oil markets. Opec oil output reportedly fell in October by 80,000 barrels per day (bpd), a Reuters survey reported, increasing the compliance with the supply curbs to 92 per cent from 86pc in September.

The drop in Iraqi output has helped support prices. The biggest drop in output in October, of 120,000bpd, came from Iraq. Output and exports in northern Iraq fell mid-month when Iraqi forces retook control of oilfields from Kurdish fighters who had been there since 2014.

Exports from southern Iraq, the outlet for most of the country’s crude, also dropped in the first three weeks of October but rose in the last week reflecting an Iraqi plan to offset reduced northern flows.

Production in Venezuela, where the oil industry is starved of funds due to the country’s economic woes, slipped further below its Opec target, the survey found. Both exports and refinery operations were lower in October.

Top exporter Saudi Arabia continued to pump below its target. Algerian output too declined during the month because of planned oilfield maintenance, industry sources reportedly said.

The combined supply from Nigeria and Libya, the two producers exempt from the cut whose extra barrels helped Opec output reach a 2017 high in July, was flat in October, the survey found.

Yet, despite all this, the overall sentiment is not too positive. Bears could definitely be seen lurking all around.

The US bank Wells Fargo is maintaining the view that the current bear market for oil could last another five to 10 years. The US West Texas Intermediate crude prices are likely to remain stuck between $30 and $60 a barrel, its Investment Institute analyst Austin Pickle wrote in a new research note.

And in the meantime, crude oil exports from the United States has hit another record, at 2.133mbpd, as domestic production continued growing in the country.

This is the first time the US oil exports have breached the 2mbpd level. The US Energy Information Agency is now also reporting the average daily US production of 9.55mbpd, up by 46,000bpd from a week earlier and from 8.52mbpd a year earlier.

Interestingly, while the US exports seem growing at a healthy rate, it is also displacing Opec crude from key markets in Asia. The US light crude is similar to the Middle Eastern grade and refineries in Asia could easily replace one with the other.

And Opec cannot continue watching it for long. It may have to react – one day or the other. And whenever this happens, it would impact the crude market dynamics, most agree.

The Oil Market Report (OMR) of the International Energy Agency is also not emitting very positive signals. Global oil supply rose 90,000bpd in September to 97.5mbpd, as non-Opec output edged higher with its output standing at 620,000bpd higher than last year.

And the global oil demand is not he too healthy, as was envisaged earlier. According to the OMR, following very strong year-on-year demand growth of 2.2mbpd in the second quarter, the pace slowed to 1.2mbpd in the third quarter, reflecting “relatively weak July and August data and the impact of hurricanes in September.”

Hurricanes ravaging some states and islands in the United States over the last couple of months also appear slowing down the growth of global oil demand by 1mbpd to 1.2mbpd in September, the OMR reported.

Despite efforts and the resultant spikes here and there, the overall global crude prognosis continues to be weak and hazy.

Published in Dawn, November 5th, 2017