Oil hits high on forecast

Brent the global benchmark for crude was up 2 or 4 percent at 51.25 a barrel by 1458 GMT. The US crude oil production peaked at 9.6 MMbpd in April 2015-the highest level since the 1970s.

All these factors pushed Oil higher and the global crude benchmark Brent went back to hover above $50 per barrel, thus breaking out of a range-bound trading pattern since early September that has mostly seen the market trade in a narrow band of $5.

Daniel Ang, an investment analyst with Phillip Futures in Singapore, said the return of Iranian oil after it complies with an agreement on curbing its nuclear programme, is likely to be part of any talks.

Another supportive factor is the weakening greenback, which drives demand by making oil cheaper for buyers who are using other currencies.

US production, which has surged in recent years and caused a roughly 50-per cent decline in prices since June last year, is also starting to decline. That brought inventories to 461.0 million barrels, more than 27% higher than a year ago. Prices had slumped to a six- year low in August as the global glut dragged on. I am predicting that oil production will fall more than 1 million barrels per day from the peak before the end of the year. “More and more supply will come from difficult areas with high costs”.

Comments by industry executives and reports about a potential meeting between Russia and the Organization of the Petroleum Exporting Countries to discuss the conditions on the oil market provided some support to prices.

The tightening market balance comes as U.S. production starts to decline, although the EIA’s latest forecasts suggest a smaller fall-off in annual output than previously expected.

U.S. crude stockpiles remain about 100 million barrels above the five-year average while OPEC continues to pump above its collective quota.

“Now we are seeing the limits at least in the near term and it is beginning to impact production”, Sieminski said.

Until this year, U.S. oil output was growing at the fastest rate on record, adding around 1 million bpd of new supply each year thanks to the introduction of new drilling techniques that have released oil and gas from shale formations.

Total world supply is expected to rise to 95.98 million barrels a day in 2016, 0.1 percent less than forecast last month, the EIA said in its Short-Term Energy Outlook.