Oil Market Glut Grows as Saudis Say Worst Is Over

Listen to Saudi Arabia and hear the oil market is rebalancing. Look at the screen, and Brent is indeed holding above $50 a barrel. But dig deeper into the world of physical oil, and bearish signals abound, at least in the European market that helps dictate global prices.

Oil traders say the European and Mediterranean market is awash with crude as Nigeria and Libya ramp up production following sabotage, Russia increases output, and Kazakhstan’s massive Kashagan oilfield in the Caspian Sea starts pumping, Bloomberg reported. North Sea production is also returning from summer maintenance. At the same time, refineries that process the oil are themselves undergoing seasonal work, eroding their demand.

The biggest challenge for speculators is perhaps Nigeria, where production is returning after months of disruptions. The West African OPEC country is expected to pump this month about 1.7-1.8 million barrels a day, up from a three-decade low of 1.39 million barrels a day in August. Nigeria cut the price of every type of crude it sells on Tuesday in an effort to regain share of the global energy market at a time when its state-owned oil company said there’s a "huge" glut of cargoes.

Libya, another OPEC member, is also producing more. The country’s National Oil Corp. said last week it was pumping 560,000 barrels a day, which would be the highest level since November 2014, data compiled by Bloomberg show.

In Kazakhstan the first barrels from the $50 billion Kashagan field have started to flow while Russian production is running so far this month at 11.2 million barrels a day, up about 100,000 barrels a day from last month and roughly 500,000 barrels a day higher than in August. The Russian increase in two months is equal to the output of OPEC member Ecuador. The flood of crude into Europe is at odds with comments from Khalid Al-Falih, Saudi Arabia’s Minister of Energy and Industry. The oil market is “clearly rebalancing,” bringing the industry to the end of a “considerable downturn,” he said at a conference in London on Oct. 19.