Oil prices edged up yesterday, supported by the reports on some details of the OPEC output slash, even though there were some doubts about the producer compliance with supply reduction targets that were happening in the market.
The Brent Crude Futures, which is actually the global benchmark for the oil prices, was trading at around $56.06 /barrel at 02: 49 GMT, 6 cents more from the previous day’s closure. The U.S. (WTI) crude future was at $53.08 per barrel, which is 8 cents more than the previous day. The record imports (China) of oil at 8.56 million barrels /day in the month of December supported the prices with all the imports expected to shoot up in the year 2017, as per experts’ opinion.
Traders stated that these prices were also supported by comments from the Saudi Arabia crude exporter that the output had dropped below the level 10 million bpd, last seen in early 2015. This will also mean that the kingdom has reduced the production by more than 486,000 barrels per day it agreed to in one of the global deals for stemming the drop in oil prices. But, the hard evidence of supply reductions to the customers is yet to be emerging 2 weeks in the month of January when these cuts by OPEC (Organization of Petroleum Countries) as well as other producers just like Russia was supposed to be starting.
The direction of these prices will mostly depend on the producers’ compliance with the pledged supply cuts that were made in the year 2016, stated the French Bank BNP Paribas. This market has actually rallied since the year 2016 more in faith than the fact by following selected non-OPEC nations and OPEC nations, by announcing the output reduction for the first 6 months of the year 2017. Any sort of slip in the market’s confidence, which producers may follow through in their promises, can actually lead to sharp price corrections.
BNP stated that it now expects the WTI prices to be averaging around $56 per barrel in the year 2017, $7 more from the previous forecast and Brent will average at $56 per barrel in the year 2017, which is $8 more that its prior estimation.
The United States Energy Information Administration stated that in January outlook it estimates the Brent as well as WTI to be averaging at $53/ barrel and about $52/ barrel respectively in the year 2017. The Dutch bank ABN Amro stated that these conflicting signals will most likely keep the oil prices trading in the narrow lines during the first six months of the year. The bank also stated that many are still doubtful on the outcome of the agreement between the members of non-OPEC and OPEC producers in cutting the output.