News Worms
News Worms


Oil prices improve as crude market continues to tighten

Oil prices improve as crude market continues to tighten

Oil prices are now trading flat, after the Organisation of Petroleum Exporting Countries (OPEC) stated that the market is gradually tightening, after years of oversupply. The pact expires in March, and oil producers are debating whether to extend it later into the year.

Oil Price reports in its article Oil Stable After OPEC Chief Suggests "Extraordinary Measures" that "there is a growing consensus that, number one, the re-balancing process is underway".

Barkindo's speech, delivered by video-link at the Reuters Global Commodities Summit in London, came after the secretary-general said Sunday that "extraordinary measures may have to be taken in order to restore" stability in the global oil market.

Barkindo didn't elaborate on what those additional measures could be and if they would include the main proposal now on the table - an extension of the existing cuts by up to nine months - or something else. The cuts have helped revive crude, which had fallen to half its 2014 peak.

On Wednesday, OPEC forecast higher demand for its oil in 2018 and said its production-cutting deal with rival producers was clearing the glut after more than three years.

Oil futures fell more than 2 per cent on Friday, ending Brent crude's longest multi-week rally in 16 months as oversupply concerns reappeared as producers have started hedging future drilling. The jump follows a 3.3-percent decline last week, the sharpest weekly fall in four months.

After oil tumbled below $30 previous year, Opec shifted strategy with the production pact that has seen prices recover to fluctuate in the $50-55 range.

The 24 producers that agreed to pump less oil are looking forward to welcoming additional participants in the accord, Barkindo said, without identifying any possible newcomers.

When the futures market shows near-dated oil contracts trading above those further out, a pricing structure known as backwardation emerges, which indicates that traders believe supply is becoming restricted and encourages anyone storing up physical oil to release their stocks.

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