Crude oil futures are on the rise as global oil producers move to reduce oversupply. Analysts are expecting the Organization of Petroleum Exporting Countries (OPEC) to adhere to 80 percent of its targeted production cuts, which will result in a decrease in global supply that could drive up prices. Reports from the Russian Energy Administration show that Russia’s oil production has decreased by 100,000 barrels per day in January compared to the previous month. This decline indicates that non-OPEC members will adhere to the deal reached last year to cooperate on reducing global supplies by 1.8 million barrels per day.
Consequently, Brent crude rose 0.2 percent to $56.79 per barrel and West Texas Intermediate, the American benchmark, rose 0.2 percent as well to $53.72 per barrel. Nymex reformulated gasoline blendstock, the benchmark indicator for fuel prices, rose 0.3 percent to $1.54 per gallon.
Meanwhile, oil production in the U.S. has continued to expand more than expected. Inventories have grown, and the U.S. Energy Information Administration expects American petroleum production to expand by 400,000 barrels per day by 2018. As it appears, American production will limit the planned global supply decrease and, therefore, slightly dampen future petroleum price changes.
Interestingly, analysts note that as supply levels slowly normalize, the market will become more vulnerable to geopolitical events that could impact the global supply and thus the price of oil. Chief among concerns are the president’s condemnations of Iran’s ballistic missile activity, which could lead to sanctions on Iranian oil, and the impending trade dispute over the North American Free Trade Agreement (NAFTA) that has the potential to impact Mexican and Canadian oil imports.
These changes in the oil markets appear to signal that, while not immediately, trends may move the petroleum market away from the record lows in prices consumers have been enjoying.
Read more at the Wall Street Journal.