Oil Hits Highest Since July 2015; Producers Say Market Rebalancing

Chelsea West
September 26, 2017

The front-month contract in Brent, the global oil benchmark, settled up $0.14, or 0.3%, at $56.43 a barrel on London's Intercontinental Exchange.

The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since the start of 2017, helping lift oil prices by about 15 percent in the past three months.

"London Brent crude delivery for November slipped 8¢ to $56.78 a barrel, while the U.S. crude fell roughly 15¢ to a value of $50.51 per barrel".

U.S. West Texas Intermediate crude for November delivery rose $1.56, or 3 percent, to settle at $52.22 a barrel, the highest since April. A gathering in Vienna last week between OPEC and its allies ended with no decision on an extension or deepening of the cuts beyond the first quarter of 2018, while the potential revival of US shale production is also weighing on the outlook for prices.

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Asked when Nigeria was willing to join the supply limiting deal, the minister said the country already had, in effect.

Futures rose as much as 1.4 percent in London to the highest since February 2.

Chronic oversupply, triggered in part by production gains in the United States, pushed crude oil prices below $30 per barrel early past year. While demand has yet to catch up to elevated supplies, rebounding economies in Europe and steady economic growth in the US could at least keep oil prices steady around current levels in the second half of 2017. OPEC has also jumped on the opportunity to push prices higher, with the Saudis and Iraqis cutting more supplies recently than initially committed within the cartel. That was higher than the 3.5-3.9 million barrels estimated by analysts but still smaller than weekly builds of up to 8 million barrels seen in the first two quarters. Rather than a surge in output, there's a risk of a market squeeze emerging as early as 2018, driven by those nations because of weaker investment in exploration and development, he said.

Even so, some market observers felt the price spike was overdone. All comments are subject to editorial review.

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