Oil prices up with OPEC cuts, supply risks

Oil prices up with OPEC cuts, supply risks

Oil prices rose yesterday thanks to the cuts led by the Organisation of the Petroleum Exporting Countries (OPEC), as well as United States sanctions imposed on Iran and Venezuela.

West Texas Intermediate on Thursday fell $1.03 to settle at $63.58 per barrel, while Brent settled down 90 cents at $70.83 per barrel.

"Although it is still early days, the major centers of oil demand growth are performing strongly; in China, the economy seems to be reacting to the government's stimulus measures", it said, also reporting strong demand in India.

But, alongside mounting concerns about the health of the global economy, surging USA crude inventories appears to have capped further gains.

The WTI Crude Oil market tried to rally during the day on Friday but gave back about half of the gains by the time we got into NY afternoon trading.

In December, OPEC and other major oil producers, including Russian Federation, pledged to cut production by 1.2 million barrels per day in order to prop up prices, effective from this January.

Oil Chart

Crude futures rose again on Friday, heading for a sixth-straight week of gains, as threats of a wipeout in Libyan crude supply bolstered an already squeezed market.

However, President Vladimir Putin seemingly softened that stance. OPEC has been saying the curbs must remain, but that stance is now softening. The producers are due to meet on June 25-26 to decide whether to extend the pact.

Angola's oil production saw a marginal increase last March of 7000 barrels per day (bpd) to 1.454 million bpd, according to secondary sources, the Organization of Petroleum Exporting Countries (OPEC) said. Russia's breakeven price for oil is around $42 per barrel, while the Saudis need the market to be at around $84 to fund their national budget.

The latest IEA report indicated a hefty drop in oil inventories over February which is likely another factor contributing to the climb in oil prices.

But Putin, who's Russia's ultimate dealmaker, said he wasn't decided yet on how Moscow's cooperation with OPEC should go.

Venezuela is an OPEC member but exempt from the cuts as it struggles with political turmoil, sanctions and repeated power blackouts.

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