Oil Prices Recover After Week of Sharp Declines

oil-rig

On Monday, oil prices increase by more than 1%, with traders mentioning opportunistic purchasing after sudden declines in the prior week that brought prices to their lowest since early August because of continuing weak fundamentals.

International Brent crude oil futures were trading at $46.20 per barrel at 0543 GMT, increase 62 cents, or 1.36%, from their prior close. The global benchmark on Friday had declined as low as $45.08, its weakest since Aug. 11.

U.S. West Texas Intermediate (WTI) crude futures increased 65 cents, or 1.5%, at $44.72 a barrel. On Friday, West Texas Intermediate hit $43.57, its lowest since Sept. 20.

The previous week  losses were the steepest since January, and took almost 15% off a one-year peak for Brent at $53.73 a barrel that was hit in the first-half of October.

Overall market fundamentals stay weak.

Analysts stated a planned output reduction to be decided in the course of a meeting on Nov. 30 by countries from the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers like Russia was encountering hurdles.

“Individual country details still remain challenging to agree upon,” Barclays bank said in a note to clients.

“Iraq boosted production while Saudi Arabia asked for exceptions. Russia is still sitting on the sidelines, and none of the non-OPEC members consulted thus far has expressed any intention of a cut,” Barclays said.

There are also threats that the oil supply overhang, which has determined markets for the previous two years, could continue as OPEC’s de-facto leader Saudi Arabia has threatened to increase output again should the approaching meeting between producers lead to no effect.

Even if Saudi Arabia does not follow through on that threat, its exports could increase.

“Saudi local oil demand is falling, and just maintaining current output could imply higher exports,” Barclays said.

In the United States,  there were also an indication of increasing future output as the amount of drilling rigs looking for new oil to produce increase by 9 to 450 in the week to Nov. 4, the highest level since February.

“Since its trough on May 27, 2016, producers have added 134 oil rigs (+40 percent) in the U.S.,” Goldman Sachs (NYSE:GS) said in a note.

On Additional News

On the New York Mercantile Exchange,  delivery of crude oil in December increased 1.07% to $44.54 a barrel. On the ICE Futures Exchange in London, delivery of Brent oil for January increased 0.92% to $45.98 a barrel.

In the week onward, politics are anticipated to dominate market fundamentals, with most of the attention falling on Tuesday’s U.S. Presidential Election. Oil traders will also watch out for monthly reports from the International Energy Agency and the Organization of Petroleum Exporting Counties on Thursday and Friday respectively for fresh supply-and-demand indications.

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