Oil prices continue upward swingNews // November 23, 2016
Commerzbank Research says oil prices continued their upswing in the week begining 21 November.
Brent achieved a three-week high of US$49.6 per barrel overnight, while WTI reached US$49 per barrel, its highest level in nearly four weeks, though a contract rollover also played its part in the latter case.
Commerzbank said the rise in prices since the end of last week can be explained by the growing expectation that OPEC will agree on production cuts at its meeting next week. These expectations had been fuelled by the latest comments by the Saudi Arabian oil minister and by OPEC’s offer to Iran that the country should merely cap rather than cut its output.
"Ultimately, it looks as if Saudi Arabia and its allied Gulf neighbours will reduce production on their own, though only on condition that the other OPEC states do not step up their output," said Commerzbank. "At the current time only Iraq would be in a position to do so in any case, and it has yet to declare its intention. It is unlikely that Libya or Nigeria would expand their oil production in any significant and lasting manner in view of the fraught security situation that continues to persist in both countries."
However, as Commerzbank noted, the market is likely to remain oversupplied for some time yet even after the OPEC meeting, especially since US oil production will soon start rising again. This is indicated not only by the sharp increase in drilling activity. US President-elect Donald Trump also announced overnight that he would be lifting all restrictions on US shale oil, shale gas and coal production in his first 100 days in office.