Oil prices moved in and out of negative territory today as hopes of a production cut from Saudi Arabia appeared to offset news of a rise in US crude inventories.
The American Petroleum Institute reported an increase of 1.628m barrels in US crude stockpiles for the week ended July 14. It compared to expectations for a decline of 3m barrels.
Speculation that Saudi Arabia was pondering a cut in its oil exports by 1m barrels per day provided some support for the market.
Saudi production cut?
Brent oil futures were virtually unchanged, trading at $46.40 per barrel by early afternoon, coming back from a more substantial earlier retreat that was triggered by data showing US crude stockpiles had risen again.
Speculation is rife that Saudi Arabia could be about to significantly cut its oil production in an effort to prop up the market. Insiders at OPEC were widely reported to have made it known that Saudi Arabia was considering the measure though had not made a final decision.
Those within the kingdom arguing for a production cut are thought to be anxious to counterbalance the recent rises in output led by Nigeria and Libya.
Although the latter two are OPEC members, they are not bound by OPEC´s recent landmark decision to cut production.
Increases in US stockpiles have been a major recurring factor weighing on the market this year. US and Canadian output has been on the rise in 2017, with North American producers having responded to the recovery in oil prices from the lows of just over $30 experienced last year.
Overall, US crude output has jumped from around 8.5m barrels a day in September to approximately 9.4m barrels a day at present, with shale production having beaten expectations.
Higher production from US shale producers was highlighted in a report today released by UK-based wealth manager Coutts, which forecast oil prices to remain in a range of $40 to $60 for at least the next year.
$40 per barrel?
With oil having slumped from $57 per barrel in January, the next psychological barrier on the downside is $40 per barrel.
Last week, Goldman Sachs warned in a research report that oil prices could “soon” hit $40 per barrel unless global production retreats from current levels.