Watch the interview of Matt Smith, Director of Commodity Research, ClipperData with Nayantara Rai on CNBC-TV18, in which he shared his reading and outlook on crude.
Below is the transcript of the interview.
Q: What is going on in the oil market? Yesterday we saw Brent below USD 50/ barrel. It is managing to just cling on to that level. How should we read this market, how should we approach this market?
A: What we are seeing here really is a mountain of different bearish influences. From a macro economic perspective we are seeing some weak data out this week. In terms of manufacturing numbers from China, from the US and from pockets of Europe and we are also seeing weak crude specific data coming through as well in term of oversupply on the global scale in terms of strong production coming through from some OPEC members. Also from a technical picture we are seeing certain levels being broken and from that perspective it seems as if we are likely to move lower from where we are now.
Q: So, what are you expecting going forward. I know nobody can ever get the crude market right but if you look at the OPEC output it did reach a high in the month of July, you couple that with the Iran deal that had been sealed. That has obviously got the markets a little jittery, would you expect that the OPEC is going to go forward and maybe reduce the output in the month of August?
A: No, certainly in August I don't believe. We will see those numbers coming through next week, not only from OPEC but from the International Energy Agency (IEA) and from Energy Information Administration (EIA) as well those monthly reports and what we are likely to see is all three of them showing that production from OPEC is about 32 million barrels a day. So, this three year high is really pumping at a strong level there. But what we are likely to see over the months going forward is a pull back in Saudi production possibly as we see lesser domestic demand coming through from them in terms of power generation but offsetting that we will continue to see strong production coming through from Iraq and strong exports too but what we are likely to see is OPEC remaining at a strong level of output which is then going to just mean that the market is going to continue to be oversupplied. That said we will likely see a demand response to these lower prices and also seasonal response as we move into the fourth quarter and so by that time we will see the market start to tighten somewhat but until then we are going to remain at this oversupplied level of 2-2.5 million barrels a day.
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