Analysts at BBH points out that the September light sweet crude oil futures contracted posted a large outside down day yesterday, trading on both sides of the previous day's range and closing below that low.
“The market again rejected the $50 a barrel level. Many are skeptical about OPEC's discipline and today's IEA report illustrates why. The IEA estimates that the 22 countries bound by the agreement produced 470k barrels a day in July above the quotas. Global output is nearly 500k barrels a day above last July.”
“Meanwhile, Brent prices have moved into backwardation, which means that front month contracts sell for more than the deferred months. October is the front-month Brent oil contract. The price of October Brent is above the price of contracts out until May 2018. It is the first time the price of the front month contract is above the first deferred contract in nearly 16 months. If it is sustained, it will be seen as a sign that the oil market is re-balancing.”
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