Markets saw a rally over the week in response to anticipation of lower production. Oil was up 9.5% to $39.36 a barrel.
The recent rally was in response to news that the combined number of oil and natural-gas rigs fell by 13 to 489, just above the record low of 488 rigs in 1999, according to Baker Hughes data starting in late 1948. This gave hope to investors’ that production will slow, creating more of an equilibrium between supply and demand of oil.
However, inventory is still at record-high, US total crude oil inventory reached a new post-1939 high at 10.374M barrels on March 2nd, 2016.
Talks among major producers, including Russia and members of the Organization of the Petroleum Countries, about freezing their output also have boosted prices in recent weeks. On Wednesday, Venezuela’s oil minister Eulogio del Pino said more than 15 countries were preparing to attend a meeting to discuss a possible output freeze. The possible meeting date is set around March 20th, 2016.
However Iran will not be participating in any global effort to halt production as sanctions have just been lifted. In fact, Iran released a plan to boost output by 1M barrels onto the market within the year.
As such, there are more cuts in countries like Nigeria – oil exports from the pipeline are expected to be halted until April, cutting Nigerian output by nearly 250,000 barrels a day. Nigeria produces about 1.8 million barrels a day, according to the International Energy Agency.
Light, sweet crude for April delivery settled up $1.35, or 3.9%, Friday at $35.92 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 5. Prices are up 37% from the 13-year low reached last month.
By: Yael Shif