Oil prices hit 18-month highs yesterday, the first trading day of 2017, buoyed by hopes that a deal between Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members to cut production, which kicked in on Sunday, will drain a global supply glut.
Benchmark Brent sweet crude jumped more than two per cent to a high of 58.37 dollars, up 1.55 dollars a barrel, the highest since July 2015.
U.S. light crude oil hit an 18-month high of 55.24 dollars up 1.52 dollars a barrel, also its highest since July 2015.
January 1, 2016, marked the official start of a deal agreed by OPEC and other non-OPEC exporters such as Russia to reduce output by almost 1.8 million barrels per day (bpd).
“First signals suggest the OPEC and non-OPEC production cuts are raising hopes that the global oil oversupply will diminish,” said Hans van Cleef, senior energy economist at ABN AMRO Bank N.V. in Amsterdam, Ric Spooner, chief market analyst at CMC Markets, agreed:
“Markets will be looking for anecdotal evidence for production cuts,” he said.
Libya and Nigeria were exempted by OPEC from the output cuts. Libya has increased its production to 685,000 bpd, from around 600,000 bpd in December, an official at the National Oil Corporation said on Sunday.
Nigeria’s crude oil output also increased by 252,800 bpd in January up from 1.697 million barrels per day in December, to 1.949 million bpd due to reduced attacks on oil facilities by the Niger Delta militants.
The production is expected to be ramped up to 2.2 million bpd within the year.
Non-OPEC Middle Eastern oil producer, Oman, told customers last week that it would cut its crude oil term allocation volumes by five per cent in March.
However, non-OPEC Russia’s oil production in December remained unchanged at 11.21 million bpd, near a 30-year high, but it was preparing to cut output by 300,000 bpd in the first half of 2017 in its contribution to the accord.
A breakdown of the agreed oil production adjustment showed that Saudi Arabia is expected to make the largest contribution by cutting production by 486,000 bpd, Algeria 50,000 bpd; Angola, 87,000; Ecuador, 26,000; Gabon, 9,000; Iran, 90,000; Iraq, 210,000; Kuwait, 131,000; Qatar, 30,000; UAE, 139,000 and Venezuela by 95,000. (The Nation)