The oil market's mood has fluctuated from bearish to bullish in the last few days, as tailwinds for the product are strengthening. A number of updates from OPEC and Venezuela along with a few oil price forecasts served to push Brent to the highest level since the beginning of the year, with prospects for the near future also positive.
OPEC said in its latest monthly oil market report its total production last month had fallen to 30.8 million bpd, down by nearly 800,000 bpd, as the cartel is seeking to cover prices again. It has fallen from 31.6 million bpd in December and was largely driven by Saudi Arabia's efforts to accelerate the rise in prices by cutting more. The Kingdom pumped 350,000 bpd less oil in January than in December of 1
Judging by the price response, where Brent touched $ 65 a Barrel earlier this week for the first time in more than a month, "what it takes" approach is finally starting to work. Russia, meanwhile, added optimism with Minister of Energy Alexander Novak, who said it would speed up the cuts it had agreed to make this month and next.
The latest from the oil cartel asked Goldman Sachs to publish an update of its price expectations and, surprisingly, this update was quite bullish. The investment bank said OPEC cuts would drive prices higher as they turned out to be deeper than expected and combined with a stronger demand that would reduce inventories. Related: How Blockchain Changes the Face of Oil Trading
Venezuela was the second factor that drove prices higher. After the US introduced new sanctions to the government of Caracas, expectations among traders seemed to be of rapid escalation and a change of regime that would limit the impact of lower Venezuelan production and exports on global markets, said Reuters John Kemp in a new column at prices.
Owever, the Maduro government has proven to be more resilient than expected, and now traders are expecting a longer confrontation that could have a prolonged impact on global oil supply, as Venezuela is one of the world's largest suppliers of heavily raw.
However, this is not a universally shared view. For example, the International Energy Agency does not believe that the removal of Venezuelan heavy crude oil from the markets will have too much effect on price patterns.
"What we know is that sanctions already make it difficult for PDVSA to export oil," said the IEA in the latest edition of the Oil Market Report. "Nonetheless, the surplus prices of crude oil prices have hardly changed on the news of the sanctions. This is because crude oil markets may be able to adapt to the first logistical dislocations. Currently, stocks on most markets are abundant and with the implementation of The new Vienna agreement at the beginning of the year, there is more available production capacity available. "
But a long time, the Venezuelan situation takes to solve previous delivery shocks, similarly suggesting that market reaction is strong in the beginning but later bleeds out and prices stabilize in the absence of another shock. Whether this is also the case, despite the OPEC cuts, is still to be seen. Particularly in view of these cuts may need to be extended over a longer period than the first four months to April: Oil demand forecasts are still on the bearish side.
By Irina Slave for Oilprice.com
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