Oil prices rose in early European trading Monday as investors grew optimistic over Greek debt negotiations, though persistent oversupply worries remained a factor for oil markets. On the New York Mercantile Exchange, light, sweet crude futures for delivery in July moved above $60 a barrel, up 60 cents or 1%. August Brent crude on London’s ICE Futures exchange was up 45 cents, or 0.7%, to $63.47 a barrel. Eurozone leaders will try to reach an agreement on Greece’s bailout at an emergency meeting today. Failure to reach an agreement could put Greece on the road to bankruptcy and exit from the euro, officials have warned in recent days. Any major currency swings as a fallout of the debt talks would impact commodities prices, including oil.
Meanwhile, excess oil production continues to pressure oil prices. The Atlantic Basin remains flush with unsold oil cargoes despite strong summer demand, resulting in some of the weakest prices in years, which is a worrying sign for the market in the fall season, Morgan Stanley’s Adam Longson said in a report. Around 10 million barrels of mostly Nigerian crude and crude of other similar grades is lingering offshore West Africa, he said. “Some cargoes are taking more than 3 months to find buyers, and current loading programs are not selling well,” Longson added.
Market observers are also keeping an eye on when U.S. oil production will show signs of significant declines due to low oil prices. The U.S. oil-rig count fell by four to 631 in the latest week, according to Baker Hughes Inc., marking the 28th straight week of declines. “Clearly the oil rig count decline in the U.S. will translate into declining production at some point — the challenge is when,” said David Hewitt, head of Asian oil research at Credit Suisse. He said the next two months may be the most interesting period of this crude-price cycle as the market waits to see when U.S. production rolls off, and whether and how quickly the Iranian sanctions are removed. “Given demand strength and curtailing U.S. production growth, we reiterate our [fourth quarter] 2015 Brent forecast of $71 a barrel,” Hewitt said.