Crude oil rallies amid talk of OPEC production cut deal extension

29 September, 2017, 00:51 | Author: Barbara Daniel
  • Brent daily chart

"It takes about three months from hedging to make rigs available and six to nine months to see increased production", Morse noted.

Last week an Opec meeting said that an agreement to cap production was another important factor helping to reduce the global supply glut. Higher crude oil prices have a positive impact on oil and gas producers (RYE) (IEZ) like ConocoPhillips (COP), Apache (APA), and Chevron (CVX).

The higher price of oil is also expected to translate into higher prices at petrol pumps, which could push inflation above 3%.

Turkey can choose to "close the valves" on oil exports from Kurdistan, Turkish President Recep Tayyip Erdogan said as the Iraqi region holds an independence referendum. Kurdistan's confidence at declaring independence from Iraq is based on its sizable oil production that has reached 600,000 bpd.

"However, the USA energy industry already appears to be rebounding quickly", he said.

"We should remember that our actions are being watched closely".

Part of the reason for the improved outlook in the oil market is the result of OPEC's recent performance. Ed Morse, global head of commodities at the bank, told Bloomberg that several OPEC countries-Libya, Nigeria, Venezuela, Iran, and Iraq-might already be pumping at their maximum capacity.

Rather than a surge in output, there's a risk of a market squeeze emerging as early as 2018, driven by those nations because of weaker investment in exploration and development, he said.

The gains in oil prices are also being propelled by China, which is building up its reserves.

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. A market surplus a year ago pushed crude oil prices to historic lows, slowed capital streams toward exploration and production and hurt the financial well-being of producers and producing states alike. USA crude futures CLc1 slid 25 cents to $51.97 a barrel, after hitting a five-month high of $52.43. However, "there could be a supply gap emerging, which could point to a tighter market", he said in Singapore on the sidelines of the S&P Global Platts APPEC Conference. The number of oil rigs in the United States fell by 5 last week, the third consecutive drop. Brent prices have been supported as demand for prompt-loading barrels at North Sea crude market has jumped and supply remains lower due to oilfield maintenance.

Middle East OPEC producers are concerned weak demand and excess supply in the first quarter of 2018 may undermine an oil price rally that has pushed Brent crude about 30 percent higher since June, OPEC and industry sources said.

The price differential between WTI and Brent futures has been widening lately as USA crude has been struggling with oversupply and the closing of refineries in the wake of Hurricane Harvey.

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