Tuesday witnessed oil prices posting their best year opening since 2014. The price of crude rose to significant highs in the midst of large Iranian anti-government rallies and consistent supply cuts initiated by Russia and OPEC.
American WTI (West Texas Intermediate) were reported to be at $60.61 per barrel, indicating an increase of 19 cents (0.3%). This is the highest recorded price since mid-2015. The global benchmark, Brent crude, was reported to be at $67.12 per barrel, also indicating an impressive jump of 0.4%. After nearly three years, both crude oil scales have opened more than $60 a barrel.
According to the American Schork Report, the positive start to the year may be attributed to the increasing turbulence in Iran. On Sunday, those protesting against the government initiated rallies to defy a potential crackdown warning by the authorities. However, even in the absence of such chaos in Iran, a critical oil exporter, the market sentiment remained bullish.
According to Jeffery Halley, who works as a senior analyst at Singapore-based Oanda futures brokerage, the diminishing inventories all over the world, combined with positive economic growth, were successful in offsetting the Forties course and the renewal of production after the Libya pipeline outage.
The North Sea Forties channel system (450,000 barrels/day) managed to return to full functioning on 30th December following an unexpected shutdown.
The year-long production cuts initiated by Russia and OPEC (Organization of the Petroleum Exporting Countries) were responsible for supporting the oil markets. These cuts began in early 2017 and will likely cover the entire 2018 as well.
There was a nearly 20% drop in the commercial crude stocks of America. Crude oil stocks in the U.S. had hit their ultimate highs in March, reaching nearly 431.9 million barrels. Crude had also been supported by high demand growth, particularly from China. Sukrit Vijayakar, energy consultancy director at Trifecta, is of the opinion that there is a possibility of a further increase in oil price.
It is only the increasing production in America (almost crossing 10 million barrels per day) which might be hampering the 2018 prediction to some extent. The increasing prices might strengthen American shale production.
There has been a nearly 16 percent increase in American oil production since June 2016. It was recorded at 9.75 million barrels per day year ending 2017.