A statement made by of representatives of Iran that the OPEC meeting in Algeria will be of the advisory nature, has cooled expectations of oil market participants that an agreement to freeze oil production at the current levels will be reached. Earlier, the price of oil rose sharply due to reduction of oil reserves in the USA and expectations that OPEC countries and major oil-producing countries outside the cartel such as Russia will reach an agreement to limit oil production in order to support oil prices.
Confrontation between Saudi Arabia and Iran continues to impede reaching an agreement in Algeria. Recall that at the beginning of this year a similar meeting OPEC has failed. The meeting ended before it began, after the representatives of Iran said that Iran did not intend to freeze or reduce oil production as the country planned to reach pre-sanctions level of oil production (about 4.2 million barrels of oil per day).
Excess of oil supply in the world has been affecting oil prices since mid-2014. A fight for the share in the oil market has increased against the growth in production of shale oil in the USA, which triggers the increase in oil production.
Drilling rigs in the USA are steadily increasing. According to oil market analysts, production of shale oil in the USA will continue as long as oil price exceeds $40 per barrel. The number of active oil rigs in the United States is steadily growing in the past 9 consecutive weeks, last week their number was 418 units.
Even if OPEC reaches an agreement to freeze production, oversupply of oil in the global market will continue because such countries as Nigeria and Venezuela are increasing production after the recent internal instability. Forest fires in Canada have stopped, and the Canadian oil only aggravates the situation with the excess oil supply in the world.
Today at 23:30 (GMT+3) American petroleum Institute (API) will present a report on changes to oil reserves in the USA for last week. On Wednesday (17:30) US Department of Energy will release a weekly report on oil and oil products inventories in US stores. It is expected that inventories will rise after the decline by 6.2 million barrels last week. The rise in oil reserves in the USA has a negative impact on oil prices.