Why crude oil prices are on upward swing, by United States energy agency

Why crude oil prices are on upward swing, by United States energy agency

Oil prices had remained mostly unchanged on Wednesday, with WTI trading slightly up 0.06% (+$.04) at $63.77 at 11:41am EST.

Both contracts climbed to their highest levels since December 2014 this week with Brent reaching $70.37 on Monday and WTI up to $64.89 on Tuesday.

OPEC's output cuts - now entering a second year - have been successful in eroding bloated stockpiles and lifting prices to a three-year high. The West Texas Intermediate was trading up 0.33 percent at 64.13 US dollars Wednesday afternoon.

"In short, inventories are coming down faster than we expected and OPEC is succeeding at rebalancing the oil market", wrote Francisco Blanch, head of global commodities and derivatives research at Bank of America Merrill Lynch. 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.

Moreover, emir of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah urged participating countries to continue to show faith in implementing the voluntary production adjustments in 2018, until the common objective of returning OECD (Organization for Economic Co-operation and Development) inventories to the five-year average is achieved and the supply-demand balance is restored. In November, oil ministers from OPEC and non-OPEC member nations agreed to extend output cuts for the duration of 2018.

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Despite this, analysts warned that the recent oil price rally, which has lifted crude by around 14 percent since early December, may be about to run out of steam.

For oil producing countries, there are many other things to focus on in an industry that, for the time being at least, appears to be robust: Yannis Bassias, chief executive of Hellenic Hydrocarbons Resources Management, told Reuters that tenders for offshore oil and gas exploration and exploitation west and south of Greece have attracted "strong interest" from companies exploring in the Mediterranean.

USA crude output is expected to soon break 10 million bpd, challenging top producers Russian Federation and Saudi Arabia.

This week, the API is reporting another, although smaller, build in gasoline inventories of 1.782 million barrels for the week ending January 12. Supply data from the Energy Information Administration will be released Thursday morning.

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