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26 Setiembre 2017, 09:41 | Dolorita Barahona
Brent daily chart
The OPEC, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since January.
Despite the Organization of the Petroleum Exporting Countries' (OPEC) self-congratulatory stance last week that its production cutbacks are successfully bringing about market rebalance, the call for extending those cuts intensified this week, with BP claiming it is essential to shrink inventories. The front-month contract in Brent retraced a little after that, but remained up $0.34, or 0.6%, at $56.77 by 10:34 a.m. ET.
West Texas Intermediate (WTI) rose 3.1% to $52.2 a barrel, its highest level since April, and 0.11% to $52.3 a barrel in early morning trading. If the gains stay, it will be oil's best quarter since 2004.
"Anything above $60 a barrel is going to be a massive incentive for USA shale to ramp up production", Chris Bake, a senior executive at Vitol Group, the world's top independent oil trader, said in an interview in Singapore.
The price increase is an additional benefit to Nigeria, which just secured the nod of the Organisation of Petroleum Exporting Countries (OPEC) for the extension of its exemption from crude oil production cap following the country's plea to be exempted until it stabilises its production.
The price of oil has fallen back on Tuesday after earlier hitting a two-year high. "This we believe is a sign of the shrinking stockpiles, as well as stronger demand".
In backwardation, prices for future delivery are cheaper than the cost of oil for immediate shipment. The entire Brent futures complex through June 2020 is now backwardated.
In both cases, the discount of WTI to Brent was wider about six to eight weeks ahead of those months, suggesting that traders need a gap of around $5 a barrel to make the trade profitable.
Turkey repeated a threat to cut off the pipeline that carries 500,000-600,000 barrels per day (bpd) of crude from northern Iraq to the Turkish port of Ceyhan.
Members of a committee monitoring an agreement to cut the equivalent of about 2 percent of world's oil demand out of the market met Friday in Vienna to discuss the impact.
Its Managing Director, Mr. Yusuf Matashi, who set this targets in Benin, said the planned increase in production was due to ongoing transformation in the firm. But inventory levels have not reached the average of the past five years, he said. OPEC also jumped on the opportunity to push prices higher after the storm, with Saudi Arabia, particularly, announcing more supplies than initially committed.
Fuel prices are also rising as US refineries come back online in the wake of Hurricane Harvey, providing boost to crude prices. That should narrow the difference between the two crude benchmarks, the analysts added.
Oilfield services firm Baker Hughes said its weekly count of oil rigs operating in the USA declined by 5 to 744, marking the third weekly decline in a row.
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