After two days of sharp sell-offs, crude oil regained its traction on Wednesday trade. Although this may be considered as good news somehow, investors still remain uncertain if the equilibrium of the supply and demand of global crude can still be restored.
International benchmark West Texas Intermediate futures for February delivery changed hands at $51.17 per barrel which is 35 cents—or 7 percent— in the Globex electronic session on the New York Mercantile Exchange. While Brent crude for March delivery was up 0.8 percent or 39 cents to $54.04 per barrel.
A 6 percent fall in the previous two US trading sessions leading to bargain-hunting was the main driver of the recent buying as analysts see it. With speculations that some OPEC producers that agreed with the deal were still producing way beyond agreed quotas, the contradiction seemed inevitable. Also, others such as Iran were in an aggressive sell-off of inventories.
In a report by the Wall Street Journal Tuesday, Libyan armed forces have penned deals that permit the National Oil Co. (NOC) to revive key infrastructures for petroleum production. This consequently led to a three-year high increase of 708,000 barrels a day in Libya’s production for this week after a fall of below 200,000 barrels a day, a representative of NOC said.
NOC thinks that it can raise its production higher from its average daily production of 575,000 barrels a day in November during the announcement of the OPEC deal to 900,000 barrels a day this year.
Even if the production cut pledge took effect earlier this month, the market would still have to wait until mid-February when the Organization of the Petroleum Exporting Countries will release its January production data to notice the premature effects of the output curb.
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