Uncertainty plagues the oil market

Uncertainty plagues the oil market

Giacomo Maniscalco
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The oil market is stalling, caught between the opposing forces of rising US shale production and OPEC cuts. But prices are unlikely to recover

The oil market is navigating uncertain waters, as every once reliable safe harbor melts away. In fact, even on the hot-button issue of crude prices there seems to be no agreement among experts, with the official data put out by the Energy Information Administration (IEA) contradicted by other sources. Already sewn, that seed of doubt will be hard to remove, and it threatens to undermine the global market. At four months from the implementation of the OPEC cuts, in spite of participation by some major non-OPEC producers like Russia, crude prices remain blocked at around $50 a barrel, and experts believe that problem is not just about expanded US shale oil output, but also asymmetrical information on the volume of US inventories. The US government reports 1.6 million barrels in stocks. The US is the only country able to provide information on its petroleum inventories in real time, since it has been funding the EIA since the 1970s. In the meantime, the market is also watching the Florida meeting between Donald Trump and Xi Jinping. During the summit, the US president and his Chinese counterpart will discuss various controversies between the two governments, from the future of the European Union to conflicts in the Middle East. The outcome of this historic meeting may prove decisive for the global oil market, since China is one of the world’s biggest importers. A country that already has the certainty that its oil revenue will go down is Egypt. Its recent agreement with Kuwait, which will go into effect in 2019, calls for 500,000 barrels less each month than the original agreement (2 million barrels per month), signed in 2014 with the energy firm Sumed.