Why crude oil prices are on upward swing, by U.S. energy agency
The United States Energy Information Administration (EIA), has attributed the current surge in oil prices to shutdown of the Forties Pipeline in the North Sea on December 11, as a result of a crack in the pipeline, which remained closed through December 30.
EIA in its Short Term Energy Report, released at the weekend, added that a brief pipeline outage in Libya, may have also affected waterborne crude oil supplies and contributed to the upward price pressure.
For example, crude oil prices reached the highest levels in more than three years during the first week in January. The rise in Brent crude oil futures prices likely reflected global oil inventory draws that were estimated to be 0.3 million barrels per day (bpd) during the fourth quarter of 2017.
Crude oil price is gradually moving to N70 a barrel. As at yesterday evening, Brent crude oil price settled at N69.87 per barrel while the West Texas Intermediate (WTI) sold at N64.30 per barrel.
The Secretary General, Organisation of the Petroleum Exporting Countries (OPEC), Mohammad Sanusi Barkindo, also identified other factors contributing to the recently gathered pace of rebalancing. They include unprecedented high conformity levels among the 24 participating nations in terms of the production adjustments, strong oil demand growth, and slower than anticipated growth in U.S. tight oil supply.
Barkindo said: “It is worth emphasizing the global importance and impact of the various historic decisions reached in 2016 that have led to the improving market conditions of today.
“The broad consensus is that the market would be in a much more difficult situation without the ‘Declaration of Cooperation’. The bold actions taken by both OPEC and non-OPEC oil producing countries address both the medium- and long-term challenges facing the oil market and help put it on a road to sustainable stability.
“The consequences of the ‘Declaration of Cooperation’ have exceeded even the most optimistic of predictions. Commercial oil stocks in the OECD are continuing to rapidly decline, investment and confidence are coming back to the industry, and a spirit of collaboration, equity and transparency pervades OPEC’s expanding relations with its non-OPEC producing partners.
With a framework of cooperation now developed and in place, and with the mandate and direction provided by the ‘Declaration of Cooperation’, producers now have the tools and the mechanisms to act more quickly and effectively in the case of future market imbalances, which history shows are bound to arise again in the oil industry.”
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