Crude oil prices rose to 51 USD per barrel today after hitting its lowest level since June 2017. The increase was fueled by the expectations that the price downturn, triggered by concerns about the world economy, has been overcome against the backdrop of the Organization of Petroleum Exporting Countries (OPEC) to tighten supplies.
Crude oil was affected by the stock market weakness, as the US government partially cessed work, the Fed raised the benchmark interest rates, and the investors remained worried about the trade dispute between the US and China and exacerbate concerns about global growth.
Brent oil rose by 0.43 USD to 50.90 USD per barrel. Earlier, the variety lowered his price to 49.93 USD, which is the lowest level since July 2017, and reported a 6.2% drop in the previous session. The US crude oil WTI rose by 0.74 USD to 43.27 USD per barrel.
The OPEC has shown that it wants higher prices and works to achieve that target.
Internationally, the trade is weak due to the Christmas holidays.
Although economic concerns are getting worse, the forecast is not as bad as in 2016, because this time OPEC is trying to support the market. Fearing to repeat the old scenario, OPEC and its allies, including Russia, earlier this month decided to return to shrink production in 2019.
The alliance, known as OPEC+, plans to cut production to 1.2 million barrels per day since January 2019. They even consider more serious quota deal, if the agreement is not enough to stabilize the commodity prices and to balance the market.
“It is not a problem in April to negotiate a greater reduction in oil yield, as this was not a problem in the past”, said the UAE energy minister, Suhail Mohammed Faraj Al Mazroui, who is also OPEC president. “If the deal is not enough to balance the market, the group will meet and decide if a deeper reduction of yields is needed”, added he.
Last week, oil reported its biggest weekly decline since 2016 amid worries about slowing global economic growth and rising supply from the United States, resulting in a surplus on the market during the next year. This outweighed OPEC’s efforts to stabilize the market.
The WTI oil futures sank by 11% last week, which is the biggest drop since January 2016.
Production levels in October will be the reference point for the contraction of production, which OPEC and several allies agreed earlier this month. However, several producers will use as reference the September levels, explained Suhail Mohammed Faraj Al Mazroui.
“Libya, Iran and Venezuela are excluded from production quota deal”, said the UAE energy minister, adding that he expects their yield to decline instead of increasing.
Also, Suhail Mohammed Faraj Al Mazroui also said that OPEC+ aims to restore the balance of the oil market, returning to the levels of the summer of 2018 in the first quarter of 2019.
Shale producers will be the first to suffer from the depreciation of oil and their production really slows down.
Meanwhile, Iraq’s oil minister said on Sunday that he expects oil prices to “improve” early next year after OPEC+ is starting to implement the deal.
“We are optimistic that the current price downturn will stop because there will be no more oversupply on the market”, said Iraq’s oil minister, Thamir Ghadhban.
The Qatari Energy Minister also noted that the oil price period is difficult.
“There is an oversupply of stocks”, said Saleh Abdulla Al Sada, created by the extraction of some countries, including Saudi Arabia, for which “there is no excuse”.