Oil prices surged in early trading on Monday after the United States and China agreed on a truce in their trade conflict and ahead of a meeting by producer club OPEC this week that is expected to result in a supply cut.
They call it production adjustments, but in reality most major oil extracting countries agreed Sunday new strategies regarding crude output were needed in light of the surplus accrued over the past few months.
Oil prices slipped on Wednesday, continuing a recent slide after surging U.S. crude output hit another record and domestic inventories rose more than expected. The U.S. Energy Information Administration (EIA) said domestic crude inventories rose 5.8 million barrels in the latest week, more than double analysts’ expectations.
Brent crude breached US$ 81 a barrel on Monday — its highest level in nearly four years — on the back of a tightening oil market and OPEC leaders signaling they won't be immediately boosting output. Global benchmark Brent crude rose as high as US$ 81.39 a barrel, its strongest level since Nov. 21, 2014.
Oil settled lower on Tuesday after rising to the highest since July 2015 the previous day, while tension flared between Saudi Arabia and Iran, and the Saudi crown prince tightened his grip on power.
Ecuador will not honor the Organization of Petroleum Exporting Countries’ (OPEC) agreement to cut oil output, Ecuador’s Oil Minister Carlos Perez said this week. The country, one of OPEC’s 14 member countries, is rethinking its commitment to drop oil production to 522,000 barrels a day.
The rally in oil prices over the past two weeks came to a halt on news that OPEC is actually exporting more oil than previously thought. A month ago, oil prices appeared to be higher than they should have been, with weak demand, elevated inventories, and a recognition that the nine-month OPEC extension would be inadequate to balance the market.
As oil prices remain unsteady and OPEC continues to make headlines every hour, the world is focused on oil's immediate future. As Saudi Arabia announces plans to slash production and move their economy away from oil dependency, many industry insiders are predicting that the now over-saturated market will reach an equilibrium with higher commodity prices by 2018 and U.S. shale production will continue to grow along with global demand.
OPEC's coordinated effort to curtail global supply has so far managed to put a floor under oil prices, which have been sitting modestly above US$50 since the deal was announced at the end of November last year. But resurging U.S. shale has been capping the upside, and Brent has not breached US$58 per barrel. Analysts and experts are now mostly predicting that oil prices will remain below US$60 this year.
As the Organization of Petroleum Exporting Countries (OPEC) has reached a deal among all 14 members to cut oil production for the first time since 2008, Russia's Energy Minister Alexander Novak said his country was ready to do its part by reducing 300,000 barrels per day in the first half of 2017, provided OPEC adheres to the level of 32.5 mln barrels daily adjusted for Indonesia and on condition of maximum reciprocity from other non-OPEC countries. Russia is not an OPEC member.