Oil prices increased to almost $52 a barrel Wednesday. This was the highest level for three months. The increase was likely due to the OPEC deal on reducing output. However, we still have to see to the extent to which that will happen. U.S. crude stocks have also been dropping which likely contributed.
According to the American Petroleum Institute (API), U.S. Crude stocks dropped by 7.6 million barrels in the week – the fifth drop for five straight weeks. The price of Brent crude increased by 87 cents to $51.74 while U.S. crude increased to $49.50 – up 81 cents. The global benchmark crude reached a high of $51.81 Wednesday, the highest figure since June 10.
Brent was below $49 towards the end of September, just prior to the OPEC members deciding on cutting output to help maintain crude prices. The price of crude oil has dropped by more than 50% since mid-2014. Yet another drop in U.S. crude prices would support the optimism that supply is beginning to drop. Much depends on the API data regarding crude stocks.
The OPEC deal will aim for crude production of between 32.5 and 33.0 million barrels a day. This is a reduction of up to 0.74 million barrels a day. Although OPEC has announced this reduction in output, it is unsure whether or not it will actually take place.
The details of the OPEC agreement have not yet been established. Many analysts believe that it will not be implemented although even a threat to reduce oil production should maintain prices at least, and reduce them at best.
Any confirmed reduction is stock is sure to push crude oil prices up. The next OPEC meeting on November 30 will be a critical one which may or may not confirm the conditions necessary for a price increase. Crude oil prices have been depressed for too long due to excess stocks. Many countries are reluctant to cut back on oil production.
Pvt. Ltd.
