Oil price dips after OPEC price spikeNews // December 6, 2016
Oil prices began the new week of trading slightly down after having surged by a good 15 per cent (Brent) and 12 per cent (WTI) last week. This was Brent’s most pronounced weekly gain since the turn of the year 2008/09 and WTI’s biggest weekly increase since February 2011. Oil prices have already turned positive again in the meantime. Brent has climbed to a new 16-month high of US$54.8 per barrel and WTI to a 16½-month high of a good US$52 per barrel. The rise in prices seen since last week was triggered chiefly by OPEC’s decision to cut production by 1.2 million barrels per day from 1 January 2017, which will mean that the oil market will no longer be oversupplied in the first half of 2017 – and in fact is even likely to show a deficit.
Commerzbank Research said the market is apparently convinced that OPEC will follow its words with action. This is by no means certain, however. Saudi Arabia and Kuwait for example plan to put two oilfields in the neutral zone that have been closed since October 2014 and May 2015 back into operation in the near future.
As a result, industry sources believe that this could see 300,000 additional barrels of oil reaching the market per day. Late in the first quarter or early in the second quarter of 2017 have been cited as possible dates for the resumption of production.
Commerzbank said that, according to the Russian energy ministry, Russia stepped up its oil production to a record 11.21 million barrels per day in November. Since the 300,000 barrel per day reduction in output that Russia has talked about implementing would be based on this November level, Russia would therefore still be producing significantly more crude oil in the first half of 2017 than it was just a few months ago.