Oil Prices Rise Toward $56 As Demand Outlook Brightens

Oil Prices Rise Toward $56 As Demand Outlook Brightens

However, it supported crude (USO)(UCO)(USL) oil prices on September 13. In November, just before the production cut was finally agreed and publically announced, Saudi ramped up output to its highest level ever, 10.72 million bpd, compared with an average from 1973 to that point of 8.04 million bpd.

OPEC and other producers, including Russian Federation, have agreed to reduce output by about 1.8 million barrels per day until next March in a bid to reduce global oil inventories and support oil prices.

Stockpiles of refined fuels in developed nations were close to their five-year average in July, and could fall to or below this level "very soon", IEA says. Nevertheless, American crude stockpiles remain nearly 90 MMbbl above the five-year average for this time of the year, and that has kept a barrel of the US grade about $5 cheaper than Brent crude.

However, gains have been limited as storms have disrupted crude imports by the world's largest oil consumer, adding more barrels to bloated inventories that otherwise would have been shipped into the United States.

Crude rose for a fifth straight day after the number of oil rigs operating in the USA declined for the second week and the International Energy Agency (IEA) raised its growth forecast for global demand this year. The bullish outlook on oil demand, lifted expectations that the demand and the supply imbalance in oil markets would continue to narrow in the coming months.

Oil Prices Rise Toward $56 As Demand Outlook Brightens
Fuel price pinching? This is what global oil market trend signals for the days ahead

"Six months is a very long time in the oil world". The stock market is still producing plenty of green arrows, and investors need to be able to capitalize.

Most recently, Russian Federation and Saudi Arabia discussed the possibility of extending for a second time the oil output-cut deal between OPEC and non-OPEC producers negotiated in November 2016. Many investors may feel like they have missed out on the markets getting to where they are today. Meanwhile, EOG Resources' premium-return wells are producing twice as much oil in their first year as non-premium ones while Devon has delivered a 450% improvement in the initial 90-day production rates of its wells since 2012. The reason there's still so much oil sitting in storage is that production remains robust.

Commodity price movements depend on inventories (cyclical component linked to short-term supply and demand shocks) and marginal costs (structural component linked to the long-term impact of technology, geology, and politics), according to the expert. "And the persistent strength in the global economy is finally registering". This would imply that the current expansion is already due for a correction.

BP's share price rose on oil's strong start to the week, now trading up 0.80 percent at 451.90p. "Trying to talk up the price won't cut it anymore and nor will simply extending the current cuts, as these have been shown to be ineffective".

"We monitor this on a monthly basis and in the period from January to August as a whole which is period during which the deal has operated they have achieved something like 86 per cent compliance, which is, by Opec's historical terms, pretty good". This NewsBase commentary is from our MEOG publication.

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