Brent jumps to two-year high as Turkey threatens Kurdish exports
29 September, 2017, 00:52 | Author: Manuel Hopkins
Internationally, the Organization of the Petroleum Exporting Countries (OPEC) and 11 rival producers, including Russian Federation, have committed to output cuts of 1.8 million bpd between January 2017 and March 2018 to help global supply align with demand.
Oil prices hit $57 on Monday after the Organisation of Petroleum Exporting Countries (OPEC) maintained the decision to exempt Nigeria and Libya from the oil production cut.
"We're expecting the second half to see improvements, and we're witnessing those improvements as we speak", UAE Energy Minister Suhail Al Mazrouei said on Monday in Abu Dhabi.
The International benchmark, Brent crude rose $1.52, or 2.7 per cent, to $58.38 per barrel, surpassing the highest level of the year.
November WTI (West Texas Intermediate) crude oil (USO) (UCO) futures contracts rose 0.5% and settled at $52.14 per barrel on September 27, 2017.
Now U.S. crude exports are either on smaller tankers, which are relatively costly to operate on long routes to Asia, or the cargoes are transferred at sea to a bigger vessel, a process that can add around $2 a barrel to shipping costs to the major consuming region of Asia.
The investment bank argued that draining inventories too low would initially benefit OPEC through higher prices, but ultimately OPEC would lose ground as US shale filled the void. Prices have shot up about 15 per cent in the past three months.
The Quiet Bull Market in Oil
Still, Brent, the global benchmark for oil, hit a new milestone, reaching March highs of $56.87 a barrel. The spread between WTI and Brent futures CL-LCO1=R widened to $7.17, its steepest since August 2015.
Opec's compliance with production cuts has improved while oil demand remains healthy.
OPEC and other oil exporters declined on Friday to extend their agreement to limit production in a bid to drain a global glut that has weighed on prices for three years.
Oil has entered a bull market on forecasts for rising demand, the return of U.S. Gulf Coast refiners after Hurricane Harvey, and as Turkey threatened to halt Kurdish crude exports through its territory.
Earlier this month, the IEA reported that world oil supply fell by 720,000 bpd in August compared to July, while on the other hand, the agency revised up its forecast for oil demand growth this year to 1.6 million bpd from the previous estimate for 1.5 million bpd growth. Total volume traded was about 28% above the 100-day average.
Despite strong fuel demand and soaring Brent prices, USA crude futures have risen much less, widening their discount against Brent to its widest since August 2015. "Oil supplies remain plentiful because domestic producers are becoming increasingly efficient at producing crude oil at lower costs, so a $45 per barrel oil market provides more incentive than in the past".
Officials said before Friday's meeting that the Joint Ministerial Monitoring Committee would consider extending the supply cut pact. This comes amid broader forecasts for bumper U.S. oil supplies.
"It's pretty clear the Kurds are going to vote for independence and we will have yet another geopolitical hot spot in the Middle East that threatens a significant amount of oil supply", said John Kilduff, a partner at Again Capita.
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