Oman crude oil price close to two-year high

Sep 27, 2017, 00:30
Oman crude oil price close to two-year high

Brent on Monday closed up 3.8%, at $59.02 a barrel, its highest settlement since July 2015, while US crude futures settled almost 23% above this year's low of $42.53 a barrel on June 21.

The Kurdish referendum on independence from Iraq may have no immediate impact on oil supply, but it is a timely reminder that potentially disruptive political events in the Middle East can never be ignored.

However, analysts warned that exporters whose budgets are dependent on oil revenues will be tempted to pump above agreed-upon levels as Brent crude nears $60 a barrel.

He also suggested that OPEC's relationship with Russian Federation is showing signs of strain, with the former Soviet Union's cutback compliance "well short of what was promised" and various officials pegging oil prices next year at an anemic $40-$43 per barrel.

What is the outlook for oil as prices slip into bear market territory?

Crude oil prices rallied Monday, with Brent hitting its highest level in two years and West Intermediate Texas (WTI) futures rising to their biggest price in about five months, amid strong demand and a bet the oil output cut will be extended next year. The oil group's cuts are doing the job intended, shale isn't responding, and Opec and friends may finally be reaping the rewards from nine months of impressive compliance with the output deal they agreed on late previous year.

"On the basis of the current IEA estimates, the oil market is more or less balanced in the second half of the year", said Commerzbank in a note. Libya's crude oil production fell by about 112,000 bpd, to 0.89 mbpd while Nigeria's output jumped by 138,000 barrels, reaching 1.86 million bpd.

The higher price of oil is also expected to translate into higher prices at petrol pumps, which could push inflation above 3%. EIA also revised lower 2018 USA oil production from 9.91 million b/d to 9.84 million b/d, a 70k b/d decrease.

OPEC also recently pledged to cut output by a collective nearly two million barrels per day, and there are signs that the notoriously fractured cartel will make good on its pledge this time.

This potential loss, combined with 1.8 million bpd of output reductions by the Organization of the Petroleum Exporting Countries and non-OPEC producers, raised concerns of tighter supply.

The production cuts have clashed with rising output from the US and Canada, which has consistently put downward pressure on prices even after the OPEC production halt. "If OPEC doesn't extend the supply curbs, the market will return to oversupply again, forecasts from the International Energy Agency indicate", according to Phil's Stock World. The U.S. government on Wednesday announced a build of 4.6 million barrels for the week ended September 15. "I imagine confidence will come back to the market with more activity, and diversification should accelerate", said Imtiaz Sikder, a finance advisor.

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