The current agreement on supply cuts is due to expire in December 2018. Brent crude futures hit a peak of $70.37 a barrel on Monday, with the global benchmark since paring some of its recent gains to trade at $68.90 on Friday afternoon. "Prices may go down again; we monitor the situation". Here's our take on the situation and why we believe that this could be the actual turnaround for the oil and gas markets.
Oil prices declined on Friday prompted by expectations of a rising U.S. shale output would offset weakening crude supplies, hindering the Organization of the Petroleum Exporting Countries' (OPEC) efforts to resolve global supply glut.
Meanwhile, a deal between oil exporters' cartel Opec and Russian Federation to trim output has also helped mop up much of the global glut that developed in recent years. "We have agreed earlier and agreed today that this format of cooperation between OPEC and non-OPEC countries can be used as a consultations format after the deal is over", he said.
Mr. Falih pointed to weaknesses in the deal, saying the first OPEC-led output cuts in nearly a decade had yet to instill enough confidence in the oil industry for investment in expensive projects.
IEA estimated OPEC supply cut compliance at 95%, although supply discipline from the non-OPEC signatories to the deal - including Russia, Kazakhstan and Malaysia - was less strong, at around 82%.
Rising US Shale Production - A Threat?
The high oil price is now being driven by a major supply cut from oil producing group OPEC, aimed at getting rid of extra supplies and keeping prices high. Gasoline inventories gained 1.8 million barrels.
"We are telling Libya it is more beneficial to look at oil revenues not the number of barrels they are producing", Falih is reported telling Libya, a message that may well apply to Nigeria.
USA oil output is set for "explosive" growth this year as prices rally, the International Energy Agency said on Friday.
The rally that began 2018 has weakened as technical indicators signal oil is overbought and amid concerns over the level of US production growth this year.
U.S. crude production for the week ending January 12 rose by 258,000 barrels a day, to 9.75 million barrels a day, according to data released this week by the U.S. Energy Information Administration. The year over year figure came in with 1.4% growth, well off the median forecast for 2.6% growth. Rather than flooding the markets with their shale output and causing the oil prices to decline, they are likely to plan their output expansion judiciously, conserving much of their cash flows for capital investments in the future years. The oil prices have jumped over 40% since the first announcement of these production cuts. We expect to see a steady yet moderate growth in the United States output over the coming months.
"The production-reduction agreement will remain for a long time and there is no thinking right now to exit it", Rashidi told a news conference in Kuwait City with OPEC Secretary General Mohammad Barkindo.
Mr Al Falih said the global economy's recovery and supply cuts have helped shrink global oil inventories and the oil market will return to balance in 2018.
The organization highlights these results in its most recent monthly report on the oil market. Excess oil inventories have declined by 220 million barrels from a level of 340 million barrels in early 2017, he said. A price increase of that size and speed "can dampen oil demand growth to some extent".
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