Oil prices rose on Wednesday for its seventh session over the growing anticipation of an extension to OPEC’s agreement of output cuts.
Global benchmark Brent oil futures edged up by 0.6 percent to $56.58 a barrel at 10:59 GMT while US crude oil (WTI) rose 0.5 percent to $53.68.
The increase in oil prices was due to the reports on the subject of Saudi Arabia telling other producers from the Organization of the Petroleum Exporting Countries (OPEC) to extend the production cut that will expire in June for another six months when they meet in Vienna on May 23, 2017. This is done for the purpose of speeding up the rebalance in the market.
During the first half of 2017 OPEC and other producers, includingRussia, have agreed to cut production by around 1.8 million barrels per day (bpd) so as to control over supply. Saudi Arabia decided to reduce more than it authorized which has helped to make up for a less strict agreement by other participants in the deal.
Turns out Saudi Arabia’s cut appeared to be one step ahead of the estimate and gave oil a boost. The country is also protecting its most important clients in Asia from the cuts, continuing to supply them with all contractual amounts.
Moreover, OPEC has raised its forecast for oil demand to 1.27 million barrels per day a major change of 10,000 barrels per day. OPEC’s monthly oil report on Wednesday come as OPEC countries cut oil production in March more than expected. In accordance with the deal, it averaged 104 percent based on OPEC’s output figures.
The cut in production came due to irregular oil prices. The OPEC Reference Basket (OBR) went down 5.7 percent in March to 50.32 bpd. Although the OBR gained a rapid increase in prices for both the quarter and the year, indicating that the OPEC production cuts which began in 2016 was a success.
Also, growth within OECD developed nations is expected at 1.9 percent within the US and the euro area seeing no changes on previous forecasts. China’s forecast growth in demand was revised from 6.2 percent to 6.3 percent
OPEC stated that policy issues and monetary policy decision will be the main aspects in ensuring this growth, but, as will maintaining stability in commodity prices.
Meanwhile, the US production and inventories are increasing. According to the government’s Energy Information Administration (EIA) on Tuesday, the country’s crude output will rise from 9.2 million bpd this year to 9.9 million bpd in 2018 with demand expectedto increase by 340,000 bpd next year which will leave rising quantities of US oil for export or storage.
Crude oil is expected to get nearly $59 per barrel and if the oil deals are extended, then almost $67 per barrel.
Official US production and inventory data will be released later on Wednesday by EIA.
It is said that the next two years could mark the largest increase in oil and gas projects production in history along with a new shale oil rise that could alone grow 1 million bpd year-on-year could create an excessive supply in 2018 and 2019.
In other energy products, natural gas (NGK7) futures for May rose 0.1 percent to $3.15 while RBOB gas futures for the same month fell 0.06 percent to 1.76 on Wednesday, 12:38 GMT.
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