OPEC's Efforts Pay Off: Oil Is Back in Bull Market

Brent weekly chart
Brent weekly chart
Author

27 September, 2017

Global benchmark Brent crude futures rose 1.55 per cent to $57.74 per barrel while USA benchmark West Texas Intermediate traded up 1.3 per cent at $51.32 per barrel at the time of writing.

Output cuts by Organisation of the Petroleum Exporting Countries and other oil producers are clearing a supply glut that has weighed on crude prices for three years, ministers said at a meeting on Friday to review the pact that expires next March. Emerging sentiment about balance, following years of oversupply, has been supportive of crude oil prices during recent sessions.

Oil prices burst out of the gate this week, rising more than 3% on Monday.

The US benchmark West Texas Intermediate (WTI) light sweet crude for November's delivery added $1.56 to settle at $52.22 a barrel on the New York Mercantile Exchange.

Kirkuk, controlled by the Kurdish forces, produces close to 400,000 barrels a day, which makes up nearly 10 percent of total Iraqi oil production.

The global benchmark of oil prices Brent crude has increased to a 26-month peak after Turkey threatened to cut supplies from the Kurdistan region in Iraq to the outside world.

But much of the renewed call for a cutback extension has been accompanied by an equally loud demand that OPEC focus on exports rather than production, and on that score Iran stated it will continue to maintain its rate of exporting oil to global customers, to the tune of about 2.2 million barrels per day (this was in response to reports of USA president Donald Trump intensifying his offensive against the country).

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Amid falling oil inventories, "it looks as [if] the market has started to get convinced that the rebalancing is actually happening", Tamas Varga, an analyst at PVM Oil Associates Ltd. said in a note Monday. "Further, the milestone of 2017-2018 will be important, when Russian Federation and Saudi Arabia will or will not extend the OPEC agreement", Konstantin Simonov emphasized. OPEC also jumped on the opportunity to push prices higher after the storm, with Saudi Arabia, particularly, announcing more supplies than initially committed.

We start the day with a higher USA dollar and we will have Consumer Confidence and New Home Sales at 9:00 A.M. and API Energy Stocks at 3:30 P.M. On the Corn front the market key is now the weather and harvest with rains and cooler temperatures are forecasted coming to a theatre near you.

The North American oil benchmark was at one point above USA $52 a barrel, its highest price since April, before sliding back somewhat.

Although Nigeria is not a member of the five nation Joint Ministerial Monitoring Committee, it had gladly accepted the invitation of the co-chairs of the Committee and the OPEC Conference President to attend the meeting because it believes the committee is doing a good job and needs to be supported and also to clarify Nigeria's position on its crude oil production, the minister said.

The pipeline to Turkey's port of Ceyhan usually pumps between 500,000 and 600,000 barrels per day, according to Reuters.

Last week, OPEC praised itself for achieving the highest compliance rate since the cuts began.


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