Supply squeeze pushes oil price to 3½-year high

Ann Santiago
April 20, 2018

Higher oil prices would likely increase demand for these shares, providing the opportunity to earn more money.

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

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.

Also, Canada's Kinder Morgan admits that its planned Trans Mountain pipeline may be "untenable" due to resistance from BC.

Crude oil prices rose to their highest level since late 2014 after government data showed US crude oil inventories fell last week, and as the market continued to worry about supply disruptions in major fossil fuel-producing nations.

The Organization of the Petroleum Exporting Countries, Russia and several other producers began to reduce supply in January 2017 in an attempt to erase a glut.

OPEC and its partners will meet in Jeddah, Saudi Arabia, on April 20.

Benchmark 10-year notes last fell 17/32 in price to yield 2.9284%, its highest since February 21.

Oil rose Thursday as Saudi Arabia reportedly eyes a price of as much as $100 a barrel ahead of a key OPEC-Russia meeting Friday.

Global resource stocks were the winners from Thursday's higher in prices.

"Saudi Arabia still calls the shots on global oil markets, and it is increasingly obvious the Saudis are comfortable with oil at $80 or more", said Interactive Investor analyst Lee Wild.

While analysts forecast Brent to rally up to $80 per barrel in the run up to the United States strikes against Syrian targets, such a high is likely to remain for a "short period but not be sustained", cautioned Spencer Welch, oil markets director at IHS Markit.

"Some of this restricted (Opec) oil production might start to return to the market", he added.

Gasoline inventories also fell by 3 million barrels last week, according to the data.

Brent futures were at $74.23 a barrel at 1115 GMT, up 75 cents from the previous close.

At current levels, futures are approaching levels not seen since Thanksgiving of 2014, when OPEC refused to take steps to stop a decline in oil prices, sparking an even sharper drop.

The Joint Ministerial Monitoring Committee (JMMC) will make a recommendation to OPEC about whether or not the production cut deal should be extended into 2019.

"Even if we reach the five-year average before June, it does not mean we just go and open the taps", a third OPEC source said.

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