Sharp Fall in Crude Inventories Galvanize Oil Prices

Marsha Scott
October 7, 2017

The trend follows last week's report from drilling services company Baker Hughes, which counted five new rigs in the US energy sector.

Meanwhile, Russian Energy Minister Alexander Novak stressed that the OPEC and non-OPEC countries agreed to monitor not only oil production, but also its exports.

After a positive week of rising prices, the oil price moved lower in Monday trading, on fresh worries on oversupply, coupled with the still strengthening United States dollar.

Hansen noted that OPEC and other oil producing countries will be happy that the price difference between the WTI and Brent Crude has increased and is about $6 per barrel at the moment. In 2018, expected daily production was reduced from 9.91 to 9.84 million barrels per day. Compliance earlier topped 90% but is now down to 86%, the Reuters survey found.

The oil market is battling with a paradox: what happens when the unstoppable force of OPEC production cuts and soaring global demand meets the immovable object that's USA shale?

But even members who are supposed to adhere to the agreement, like Iraq, have strayed.

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"Brent Crude's return to backwardation not only increases profitability of the producers who use the spot price for calculation, but also attracts to the market financial investors willing to earn money on prolongation of positions".

As with the price of gold, oil is valued in dollars.

Data revealed Wednesday morning by the U.S. Energy Information Administration showed U.S. commercial crude inventories fell by six million barrels in the week to september 29, compared with analysts' expectations for a decrease of 756,000 barrels.

Beyond short-term market drivers, analysts at Barclays bank said oil demand could be seriously dented by improving fuel efficiency and the rise of electric vehicles (EV). "Talk of a more hawkish replacement for Janet Yellen is one reason". As refiners enjoy strong margins, they have an incentive to buy more oil.

Other reports by MaliBehiribAe

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