Optimism about crude oil demand in the coming weeks has helped prices to recover somewhat, but the sustainability of the improvement is highly uncertain.
"We thus have made deep cuts to our crude oil price forecasts".
With lingering questions surrounding production cuts, the market is "iffy on what OPEC is going to do", said James Williams, president of energy consultant WTRG Economics in London, Arkansas. Since ministers from the group last met in May, oil has fallen into a bear market as analysts and traders lose faith that the cuts are working.
Brent crude was down 24 cents at $46.64 per barrel, while US West Texas Intermediate was at $44.21. Seemingly out of nowhere, there's been a most unexpected resurgence in oil production for Libya and Nigeria.
Abdulsamad al-Awadh, the former Kuwait envoy to OPEC, told Bloomberg News that other OPEC producers would have to make concessions for Libya and Nigeria as it's unlikely the two exempt countries would agree to scale back. Nigeria's production rose 50,000 bpd in June.
Though new projects mean total global production continues to rise, the slide at aging fields may give OPEC a helping hand by reducing surplus supply today, according to Erlingsen.
The disappointment with the slow pace of the deal that surfaced in the spring was exacerbated by resurgent United States shale oil output, attracted back by the higher prices, and more recently by the recovery in production in two exempt Opec members, Nigeria and Libya.
Indeed, given the recent woes afflicting the energy sector, it's easy to forget that a 1.7 million barrel per day production cut agreement between OPEC, Russia and other oil-producing nations is still in effect.
Should they reach their daily output goals of 1.25 million and 1.8 million bbl, respectively, overall OPEC production by year-end may be close to 33 million, he estimates. "Deepening the reductions under the current agreement is not on the agenda", Almarzooq said.