The bigger the discount of prompt prices to future ones, the greater the incentive for owners of physical barrels of oil to store it for sale in the future when it will sell for more. "This market was really over-bought".
According to Russia's Energy Minister, the country reduced oil production last month as part of a deal with OPEC; the current arrangement will last through March, 2018. That followed a decrease in August, increases in July, June and May, and a dip in April.
"With these three key oil producing countries reaching possible inflection points next month against a backdrop of tightening balances, geopolitics may be set to stage something of a comeback in the oil markets", the report read.
Nigeria and Libya were also exempted from the curbs.
"One can only conclude that unless OPEC approaches the original production target of its 14 members of just below 32 million barrels per day, rebalancing will suffer a major and possibly prolonged setback", said Tamas Varga, analyst at brokerage PVM. The contract fell 67 cents, or 1.2 per cent, in the last session. The country's largest oilfield, Sharara, has been closed since Sunday, an engineer at the field and a Libyan oil source said.
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Energy markets are going to be "in the driver's seat" for the rest of the year after metals and other commodities led the rally in the first two months of the third quarter, Morse said. Citigroup's forecasts call for U.S.
Drillers added six oil rigs looking for new production in the week to September 29, bringing the total count up to 750, according to energy services firm Baker Hughes.
But a stronger dollar is also impacting the oil market.
"Falling prices probably affected the supply of energy carrier in the U.S. stronger than expected, this is while Libya and Nigeria are unlikely to significantly increase production volumes in the near future", he said. "Yet it really is too early to be speculating on that". Therefore, the higher value of the U.S. dollar has made it more expensive for people not in the United States, to buy oil.