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Oil Could Return to Triple-Digit Prices

20 April, 2018, 00:59 | Author: Melinda Barton
  • Crude prices soar on decline in US inventories

Oil began a slide from above $100 - a price that Saudi Arabia endorsed in 2012 - in mid-2014, when growing supply from rival sources such as US shale began to swamp the market.

Brent crude futures climbed another 37 cents to stand at $73.85 a barrel, adding to a 2.7 percent jump overnight.

OPEC has since reversed course, reaching a deal with Russian Federation and other oil producers to cut output by 1.8 million barrels a day (MMBPD) starting in January 2017.

It has a long way to go, but oil could return to $100 per barrel if Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries (OPEC), has its way.

OPEC and its partners will meet in Jeddah, Saudi Arabia, on April 20. Iran, once a keen OPEC price hawk, now wants lower prices than Saudi Arabia.

The Schork Report Publisher Stephen Schork on the outlook for oil prices and the Aramco IPO.

Yields on USA two-year Treasuries stood at levels last visited in 2008 at 2.43 per cent and 10-year German yields went above 0.55 per cent for the first time in nearly a month. The cartel has used its power to manipulate market prices for oil in the past and actually caused their own present heartache when they dumped cheap oil on the global market trying to drive out competition from United States frackers, among other reasons.


"This is not to say that the current $74-plus Brent price is not vindicated by other factors, but based purely on global supply and demand data, prices should not be this high". "Despite the influence of USA shale, Saudi Arabia still calls the shots on global oil markets, and it's increasingly obvious the Saudi's are comfortable with oil at $80 or more", said Lee Wild, head of equity strategy at Interactive Investor.

"I personally think that now $70 is the floor for oil prices", a second OPEC source said. While futures in London have broken past the 50 percent Fibonacci retracement of the slump from when they were above $100 in mid-2014, another signal shows the rally could persist to the line just under $82.

Stockpiles of gasoline also dropped by 3 million barrels, while distillates fuels including diesel decline by 3.1 million barrels.

The cuts have been even bigger than those specified in the deal, thanks in part to a slide in Venezuelan production due to an economic crisis in the South American country.

The impression is that oil prices are seen as not yet high enough to encourage sufficient oil investment.

OPEC's Joint Ministerial Monitoring Committee will recommend to OPEC whether the deal should be extended into 2019.

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