Oil prices up on expectations of production cut extension
(FinancialPress) — A major meeting set for the upcoming week has oil on the rise, as traders look towards it to cement an extension on production cuts – even when gains were capped by rising U.S. output.
Brent crude was up $0.47, reaching $62.69 a barrel by 09:32 GMT. U.S. light crude oil rose $0.32, up to $56.74.
Brent moved within range, with analysts expecting it to move between the $61 and $63 price gap. This happens as the market looks forward to what comes of the OPEC (Organization of the Petroleum Exporting Countries) meeting set for November 30th.
The Organization, allied with other non-members that have Russia at the helm, has managed to orchestrate an effort to end globe-wide oversupply with output restrictions – hoping that this will help prices get off of their current slump. Next week‘s meeting is expected to erase the March 2018 expiry date and thus extend the agreement.
Ole Hansen, Saxo Bank senior manager, stated on the topic: “There’s a general belief that anything but an extension could have a significant negative impact … So the market is just waiting for confirmation that OPEC wants to move on with the extension.“
The fact that storage levels remain consistently high even in light of the recent measures feeds expectations of the OPEC and its allies extending the cuts. However, some believe not all participants will be willing to continue to restrict their production.
Even so, that‘s not the biggest headache OPEC is experiencing – it‘s actually the rise of U.S. drilling that‘s being led by shale oil producers.
But the biggest headache for OPEC has been a rise in U.S. drilling, led by shale oil producers.
Westwood Global Energy Group, which specializes in energy consultancy, noted that the rising rig count is an inaccurate measure of how quickly U.S. output would climb – as producers become even more productive per well. Rig count has risen from 316 rigs in mid-2016 to 738 last week.
“Westwood Global Energy forecasts an 18 percent increase in active rigs in 2018, but more rapid demand growth in certain service areas as operators focus on efficiency and delivering more for less,” the consultancy said.