Despite the scepticism that greeted the OPEC and non-OPEC allies supply cut’s deal to balance the oil market, the prices of crude oil edged up on Monday following the ongoing supply cuts from OPEC and its petro-power allies, Russia as well as by a drop in U.S. drilling activity.
As at the time of filing this report, the International Brent crude oil futures were at $60.75 per barrel at 0040 GMT, up 27 cents, or 0.5 percent, from their last close, while the U.S. West Texas Intermediate (WTI) crude futures were up 22 cents, or 0.4 percent, at $51.81 a barrel.
Pointing to supply cuts from OPEC and some non-OPEC allies, including Russia as a fundamental driver, an economic research firm, TS Lombard had said that “oil prices are likely to stabilise around current levels and quite possibly drift upwards”.
The CEO of Sun Global Investments, Mihir Kapadia, also said, “Should Opec continue with the production cutback strategy, oil prices are expected to move towards $65 by mid-March and strengthen exponentially further after the Iran sanction wavier expires.”
When about six months ago, the oil prices soared around the $65 and above altitude, not many envisaged the sudden collapse that struck the market in October 2018, leaving it on a steady slide for about three months.
Many industry analysts have attributed the collapse of oil prices to President Trump’s convincing Saudi Arabia to increase production to make up for oil that would be lost as a result of Iranian sanctions. This is also in addition to the exemptions Trump administration’s granted to allow countries to continue importing Iranian oil. The exemptions which were supposed to last for 180 days, is said to have created too much oil in the market.
To these analysts, such market forces and alliances should be taken cognisance of when pushing for market rebalancing.