OPEC's Efforts Pay Off: Oil Is Back in Bull Market

  • OPEC's Efforts Pay Off: Oil Is Back in Bull Market

OPEC's Efforts Pay Off: Oil Is Back in Bull Market

The U.S. market continues to signal large oversupply, Reuters reported.

At 2:40pm EST, WTI was trading down 0.69% (-$0.36) at $51.86, while Brent crude traded down 0.92% (-$0.54) at $57.89-dollars above last week's levels. The trading range has been 354 ¼ to 352 ¼.

United States crude for November delivery was up 41 cents at $51.07 a barrel, close to recent four-month highs, CNBC reported.

However, other analysts were sceptical about further price gains due to higher oil output from the US. "I think that tomorrow the price will be high, but by Thursday and Friday it will start to decline", Ivan Kapitonov expects. In the overnight electronic session the November Crude Oil is now trading at 5184 which is 38 points lower. First quarter production for Nigeria averaged 1.5 million barrels per day and Nigeria last topped 1.8 million barrels per day in 2015.

"This is a products-led rally".

In backwardation, prices for future delivery are cheaper than the cost of oil for immediate shipment.

The average price of Oman oil for October delivery increased $2.76 to touch $50.39 per barrel. "This further confirms that the fundamentals of supply and demand that have been out of balance are gradually but steadily rebalancing".

Still, after years of gloom, the mood in the oil market is shifting.

In May, OPEC and non-OPEC members agreed to extend production cuts of 1.8m barrels per day for a period of nine months until March 2018 but rising production from the U.S., Nigeria and Libya has undermined the oil cartel's efforts to curb excess supply. Major oil producers convening in Vienna for an OPEC-led committee meeting on Friday boasted record compliance with their production-cut agreement, but, as expected, made a decision to wait a bit longer to see if any further action was needed. Yet, that was an incorrect assessment as they doubted OPEC and mainly Saudi Arabia's resolve to remove supply. Opec and non-Opec technical committee estimates that compliance to output cuts crossed 100 per cent in September. Looked at from another direction, there's a more important question: Has US shale usurped Opec as the global swing producer? "Now that we see refineries coming back online that should take the scarcity premium out of the market, refined prices will fall, and that will bring oil down with it".

The new price of Brent crude, which is $13.5 excess on each barrel of over 1.8 million barrels produced in the country, also surged the recovery hope for the country's budget.

Caught on the wrong side of the rally are bearish traders who believed USA drillers would just ramp up production once prices rose over $50.00, but that is not likely to be the case.

There are major reasons why shale stuttered. Because it has lost its crown as the world's top oil player.

As the global oil market tightens, Geo-political risk factors matter more.

Investors were also eying developments in North Korea. The recent Independence vote.

As well as increased demand, especially from China, Turkey's threat to disrupt oil flows from Iraq's Kurdistan region, helped push up prices on Monday. "We have the tap", Erdogan said. The total draw for crude oil in 2017 now stands at just shy of 23 million barrels. The Iraqi government does not recognise the referendum and has called on foreign countries to stop importing Kurdish crude oil.

Puerto Rico was devastated by the impact of Irma and Hurricane Maria, which hit the US island territory as a Category 4 storm. "Supported by the improving forward structure in the futures market, floating storage has also been on a declining trend since June".