Oil's Highest Level Since 2015

Brent price hits three-year highs

Brent price hits three-year highs

The market now appears to be re-stabilizing, with Reuters reporting that oil prices have hit their highest-point in two years this week.

The agency said US crude oil production increased in 2017 by more than 384,000 barrels per day (BPD), to 9.2 million barrels per day (MMBPD), based on data through September and estimates for the remainder of 2017. Likewise, the oil for delivery in February was trading higher by Rs 33 or 0.84 per cent at Rs 3,939 per barrel in 216 lots.

EIA data shows commercial stocks 167 million barrels above the five-year seasonal average at the end of October, down from a surplus of 380 million barrels in July 2016 (tmsnrt.rs/2CgLBYl).

Large-scale conventional projects commissioned before the crash are also expected to come on stream in Brazil and Canada this year, boosting total supply from outside Opec by about 1.6m b/d in 2018, according to the International Energy Agency.

Balancing the trend towards a tighter market is higher production in the United States, where the OPEC-led effort to push prices up is spurring more shale oil output.

"Political unrest in the Middle East, alongside assumptions of OPEC extending its agreement to cut production, helped to bolster oil prices in late 2017", observed a Moody's Senior Vice President, Terry Marshall said.

Traders are looking to see if Russian Federation - which has faced opposition to the cuts from domestic oil companies - and Opec kingpin Saudi Arabia can agree an exit strategy that will stop a flood of barrels returning to the market. "If we don't see that pattern continue then, we could see a significant correction", McGillian noted. Compliance has been high, as producers have chose to extend the supply pact until the end of 2018.

Brent oil price rose above $68 for the first time since May 13, 2015.

"The protests in Iran added more fuel to the already bullish oil market mood", said Norbert Rucker, head of commodity research at Swiss Bank Julius Baer.

Canada, Saudi Arabia, and Venezuela were the largest foreign suppliers of crude oil to the U.S. On Tuesday, crude futures reached $67.29, the May 2015 high.

Even when prices were weak, most Opec members could still enjoy handsome margins as their production costs - as low as $10-15 a barrel in Saudi Arabia - are among the world's lowest.

History suggests that OPEC will gamble on tightening the market too much, with prices overshooting on the upside, rather than risk not tightening it enough and prices fall back.

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