Oil prices hit near record levels
World oil prices continue to keep a swift growth standing at near 2016 highs, underpinned by a surprisingly large drop in the U.S. black gold reserves for a fifth straight week.
Benchmark Brent crude futures were trading at $51.85 per barrel, while U.S. West Texas Intermediate (WTI) futures stood at $49.83. Both contracts hit their highest in nearly four months on October 5 buoyed by the official U.S. stockpile data that confounded expectations for an increase and revealed a fall of 3 million barrels last week to 499.74 million barrels.
Azeri Light crude that Azerbaijan sells to the world market was trading at $51.98. OPEC oil basket’s price stood at $47.74 per barrel recording a growth of $1.04 on October 5.
Upsurge in prices is mainly connected with U.S. government's Energy Information Administration (EIA) data, which revealed that U.S. inventories (excluding the Strategic Petroleum Reserve) fell below 500 million barrels for the first time since January, to 499.7 million, while forecasted fall was at 2.6 million barrels.
The drawdown became surprising for market participants, as it occurred at the end of summer and extended into autumn when driving usually drops and U.S. refineries shut for maintenance operations.
Moreover, oil output in the country decreased by 0.35 percent (some 30,000 barrels per day) down to 8.467 million barrels.
Despite surprising storage declines pushed prices to the upper end, some analysts say inventories are still at near record highs and positive dynamics is temporary and unlikely to mark the easing of the oil supply glut.
The recently reached OPEC’s preliminary deal, where cartel members agreed to cut down the oil output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd, still remains one of the most essential factors in the market, while views of traders about the possibility of the deal are very controversial.
The production levels in Nigeria, Libya and Iran, the three countries that got a pass to produce "at maximum levels that make sense" is one of the most acute uncertainty in the market, as increase in output of these countries would force remaining OPEC states and other countries to shoulder the bulk of the production cuts.
Doubtful traders, however, say the prospect of a modest cut in production from the world's largest exporters might not be enough to reach a balance in the market.
Meanwhile, Algeria's Energy Minister Nouredine Bouterfa said OPEC and non-OPEC states plan to hold an informal meeting in Istanbul on October 8-13 to discuss how to implement the preliminary Algeria deal. He told local media that in the case of need OPEC could cut production at its late November meeting in Vienna by another one percent more than 700,000 bpd agreed in Algieria, mentioning that the deal to cut output would be in force for up to a year.
The further action of non-OPEC states is also essential for the market, as drop of supply by 0.5 million barrels is expected to be reached by means of output reductions in the countries outside the group.
Venezuela's Oil Minister Eulogio Del Pino earlier said the talks are currently underway with Oman, Russia and Azerbaijan, adding that the consensus with the three major oil producers, who are not cartel members, would be an historic event.