Oil prices hit 18-month high on Tuesday, the first trading day of 2017, buoyed by hopes that a deal between Organization of Petroleum Exporting Countries (OPEC) and non-OPEC members to cut production, which kicked in on Sunday, will drain a global supply glut.
Benchmark Brent sweet crude jumped more than two per cent to a high of 58.37 dollars, up 1.55 dollars a barrel, the highest since July 2015.
U.S. light crude oil hit an 18-month high of 55.24 dollars up 1.52 dollars a barrel, also its highest since July 2015.
January 1, 2016, marked the official start of a deal agreed by OPEC and other non-OPEC exporters such as Russia to reduce output by almost 1.8 million barrels per day (bpd).
“First signals suggest the OPEC and non-OPEC production cuts are raising hopes that the global oil oversupply will diminish,” said Hans van Cleef, senior energy economist at ABN AMRO Bank N.V. in Amsterdam, Ric Spooner, chief market analyst at CMC Markets, agreed:
“Markets will be looking for anecdotal evidence for production cuts,” he said.
Libya and Nigeria were exempted by OPEC from the output cuts. The North African nation has increased its production to 685, 000 bpd from about 600, 0000 bpd in December, an official of the National Oil Corporation said last week.
Nigeria’s crude oil output also increased by 252, 800 bpd in January up from 1.697 million bpd in December, to 1.949 million bpd due to reduced attacks on oil installations and facilities by militants.
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