Higher Crude Oil Prices Seen on Low US Output

After rallying last week, oil prices held on to most of the gains it recorded from Friday’s trading session after reports of a decline in the drilling activity in the United States during the previous week as well as market expectations that sanctions may be introduced by the United States against Iran. 

Due to a growing tension between the United States and Iran, risks for oil traders have increased leading to a rally in the oil price sin the middle of a rise in U.S. oil production during the past couple of weeks. 

Over the past week, U.S. crude oil futures hovered near a three-year high prior to the release of U.S. supply data from the American Petroleum Institute that revealed a higher U.S. crude supplies for the month of March. While the API posted a rise in the supplies, the markets have already shifted its attention to the sanctions being possibly imposed by the United States against Iran due to its ability to export crude oil.

Oil prices have also rallied over the past week due to Saudi Arabia’s announcement that it intends to propose another extension of the crude oil production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) until the year 2019. 

The initial agreement have been extended by another nine months until the end of 2018 and has helped prop oil prices higher since the second half of last year. Prices of crude oil were then seen trading by as much as $70 per barrel since the beginning of the year. Tensions in the Middle East that threatens its production and supply also helped push oil prices higher during the past week.

While U.S. crude production is still considered to be rising by most analysts, some have stated that the demand for crude oil products is currently strong and growing which will still lead to a tighter market despite the continuous growth in U.S. shale.

Growing Crude Output in the U.S. Fail To Send Oil Prices Lower

Oil Price Movement

Crude oil prices which has been trading positively until the past two months have been seen by the markets to go down a number of trading sessions following reports of weekly rise in the crude production of the United States as well as a number of political issues in other countries.

The U.S. West Texas Intermediate was up by 0.4% or 27 cents to settle at $65.21 per barrel during the trading session on Monday. The WTI ended around the $65 per barrel level during Friday’s trading session boosted by a small decline in the oil production of the United States.

Brent crude futures also traded up by 0.55% to trade at $69.71 per barrel which is 37 cents higher from its previous settlement. Crude oil prices are mostly trading positively these past week due to the announcement from Saudi Arabia of its plans on pushing for another extension of the OPEC production cut agreement.

See Also: Oil Prices Steady After Surprise U.S. Crude Inventory Draw

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