Crude oil has touched its highest point since June 19th, marking its consistent rise over six straight sessions. Meanwhile, U.S. output has declined significantly, presenting a contrasting picture to the prevailing market conditions. However, the pressure remains on the market, despite its good showing.
Main reason for pressure
The primary concern for oil market investors is that the global oversupply question still looms large. The pressure on the prices arising from this resolved issue continues to remain and there is still concern about how it will impact the prices here in the coming weeks and months.
A 28 cent increase was witnessed in U.S. West Texas Intermediate to sell at $44.01 a barrel. Brent futures benchmark also mimicked the movement to post a 28 cent gain, resulting in a pricing of $47.59 per barrel. According to market analyst expansion in shale drilling as well as a better than expected rebound in the Nigeria, Libya production figures are expected to impact the pricing significantly.
Expectation of a $45 per barrel pricing after March
Experts also believe that there is a clear risk that inventory normalization will not take place until the end of March next year when the OPEC cut will come into force. This could mean that the price per barrel could stand at around $45 at this time. However, if there is a big change in the horizontal rig count in the U.S., bringing the number down or stock draws are continued or the OPEC production limits are increased, then the situation and pricing could be substantially impacted.
The current situation is that stock of crude oil rose to 118,000 barrels over the past week and simultaneously production dipped by 100,000 barrels a day. The U.S. Energy Information Administration says that this is the biggest fall in output since July last year. Crude pricing was supported by a decline in the gasoline inventory in the country.
It is too early to say if the pricing will go the way the experts predict. The driving season is just starting so demand can be expected to fluctuate quite significantly in the coming weeks and this will impact prices too. However, the U.S. production declines may also be attributed to short- term challenges like the storm in the Gulf of Mexico and maintenance in the Alaskan region on pipelines. Once the impact of these temporary factors is no longer relevant the prices may change.