21 April, AtoZForex, London – Analysts have doomed crude oil amid an unsuccessful Doha OPEC meeting. But the black gold remains on the rise breaking above the prior highs. What is happening? The following are the reasons behind Crude oil rally.
3 Reasons behind Crude oil rally
Crude oil prices climbed to the highest level in almost five months and are trading above $44 per barrel level as we speak. Kuwait, US, and Iran are the key reasons behind Crude oil rally.
Kuwait oil-worker strike
Kuwait was seeking to restore crude production as thousands of oil workers stayed off in a strike that’s slashed the OPEC member’s output by approximately 1.7 MMbopd, an amount exceeding the current global oil surplus.
Oil production fell 60% to 1.1 MMbpd when the strike began on Sunday. Kuwait pumped 2.81 MMbpd prior month, making it OPEC’s fourth largest crude producer. Meanwhile, global supply exceeded demand by 1.6 MMbbl in the Q1, according to the International Energy Agency.
“If the Kuwaiti strike persists, it re-balances the market,” Robin Mills, CEO at consultant Qamar Energy in Dubai, said by phone. “So far it looks like Kuwait is meeting demand and supplying their commitments out of storage.”
Slipping US output
US crude oil output shrank to 8.95 MMbpd the previous week, the lowest level since October 2014, Energy Information Administration data showed. Additionally, rigs targeting oil in the US slipped to the lowest number since November 2009.
“The drop in the rig count is starting to have a big impact on production,” said Joe Bozoyan, an equity portfolio manager who focuses on energy at John Hancock in Boston. “Production is already down 600,000 bbl from its peak last year and is going to go lower. The rebalancing of the market is starting to happen.”
New oil freeze deal
Major OPEC members and other crude producers will meet in Russia, possibly next month, in a new attempt to agree on an output freeze to shore up oil prices, and is the last of the main reasons behind Crude oil rally.
Following the lift of sanctions, Iran is seeking to boost crude production and exports. Talks in the Qatari capital Doha between the world’s largest producers about capping production therefore failed. Tensions between regional antagonists Saudi Arabia and Iran have flared as they take opposite sides in conflicts in Yemen and Syria.
Now, “Iraq will take part in this meeting,” Iraq’s Deputy Oil Minister Fayyad Al-Nima said. “Iraq’s view is to have a freeze in output for a short period to help protect the interests of both producers and consumers equally by easing the surplus from the market and improving prices.”
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