The oil market sentiment has fluctuated from bearish to bullish in recent days as tailwinds for commodity strength. A number of updates from OPEC and Venezuela, along with a couple of oil price forecasts, helped push Brent to the highest level since the beginning of the year, with the prospects in 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 intends to raise prices again. It is down from 31.6 million bpd in December, and was largely driven by Saudi Arabia's efforts to accelerate inflation by cutting more. The Kingdom pumped 350,000 bpd less oil in January than in December, at 1
Judging by the price reaction, with Brent touching US $ 65 a barrel earlier this week for the First time of more than a month, "what is needed" approach is finally beginning to work. Russia, meanwhile, was added to the optimism of Energy Minister Alexander Novak and said it would speed up the cuts as it agreed to do this month and next.
The latest from the oil cartel asked Goldman Sachs to provide an update of the expectations of prices 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 stronger demand that would reduce inventory. Related: How Blockchain Changes the Face of Oil Trading
Venezuela was the second factor that drove higher prices. After the US introduced new sanctions on the government of Caracas, expectations among traders seemed to be a rapid escalation and a regime shift that would limit the impact of lower Venezuelan production and exports on global markets, said Reuters & # 39; John Kemp in a new column at prices.
Owever, the Maduro government has proved to be more resilient than expected, and now traders are dealing with a longer confrontation that can have a lasting impact on worldwide oil supplies, with Venezuela being one of the world's largest suppliers of heavy crude.
However, this is not a universally shared opinion. For example, the international energy agency does not believe that the removal of Venezuelan heavy crude oil from markets will have too much effect on price patterns.
"What we know is that sanctions already make it difficult for PDVSA to export oil," the IEA said in the latest issue of the Oil Market Report. "However, surplus crude oil prices have hardly changed the news of the sanctions, because in terms of crude oil, markets may be able to adjust to initial logistical dislocations. Currently, stocks on most markets are good and with the implementation of the new one. The Vienna agreement at the beginning of the year, there is more savings production capacity available. "
As long as the Venezuelan situation takes to solve past supply shocks of a similar kind, suggests that the market reaction is strong first, but later turns out and prices stabilize in absence of another shock. Whether this is what will happen now also, despite the OPEC cuts, remains to be seen. In particular, these cuts may need to be extended over a longer period than the first four months to April: The oil demand forecasts are still on the bearish side.
By Irina Slav for Oilprice.com
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