Oil Prices expected to go up

Oil prices eased on December 6 as crude output rose in virtually every major export region despite plans by OPEC and Russian Federation to cut production, triggering fears that a fuel glut that has dogged markets for over two years might last well into 2017. OPEC’s November output rose to 34.19 million barrels per day, compared to 33.82 million in October.

Contributing to this, according to the report, is USA crude oil production that averaged 9.4 million barrels per day in 2015, and is forecast to average 8.9 million in 2016 and 8.8 million in 2017.

The non-OPEC countries are being asked to follow, by a lesser amount, the cuts agreed to by Opec last week that has already resulted in an 18 per cent rise in the price of oil.

West Texas Intermediate (WTI) crude futures were at $51.49 a barrel, down 52 cents, or 1 percent.

Further pressure on prices could come tonight when the US government updates the market on its oil stockpiles. The Energy Information Administration increased its USA oil output forecast for this year and next, and domestic explorers last week raised the number of rigs in action to the most since January.

In the Middle East, where the deepest OPEC production cuts are expected, there are also signs that production will rise before it gets cut.

“The report was bearish despite the overall crude oil drawdown”, said John Kilduff, partner at energy hedge fund Again Capital LLC in NY, noting increases in refined products inventories.

“We are optimistic about a commitment from non-OPEC”. Combined with OPEC, the two produced enough to cover nearly half of global oil demand.

OPEC members pledged to cut their production by 1.2 million barrels a day to slash overall supplies to around 32.5 million barrels a day.

OPEC, which accounts for a third of global oil production, made a preliminary agreement in Algiers in September to cap output in an effort to prop up oil prices, which have halved since mid-2014.

Weekly data from the InterContinental Exchange on Monday showed investors had raised net long positions on Brent to the highest level in four weeks.

On the other hand, non-OPEC Russia, who promised to cut supplies by 300,000 barrels a day, also posted a fresh record in their production level last month.

“Firstly, this remains a growth business, with oil demand in OPEC’s 2016 World Oil Outlook reaching over 109 million barrels of oil a day by 2040, a healthy increase of over 16 million barrels a day”.