The oil market has rebounded with buyers paying a premium to receive their barrels speedily. Now, crude oil for this month is more expensive than the next, as the oil market enters into a state known as backwardation.
Supply of crude has been cut as the Keystone pipeline has shutdown. Additionally, US data showed a decline in stockpiles as investors look towards OPEC and its decision to continue to slash output beyond the March 2018 deadline.
Crude oil reached a two-year high on Wednesday, adding as much as 2% to its value and touching $58 per barrel, before moving slightly downwards to $57.90. Stockpiles fell by 6.36 million barrels last week, with the latest US inventories to be released later today.
OPEC are looking to recruit another 20 non-members to its supply-cut campaign in an effort to rebalance the oil market. Argentina, Benin, Bolivia, Brazil, Cameroon, Chad, Colombia, Democratic Republic of Congo, Congo, Egypt, Ghana, Indonesia, Ivory Coast, Mauritania, Niger, Norway, South Africa, Tajikistan, Turkmenistan and Uzbekistan have been added to the guest list for the November 30th meeting.
The anti-corruption movement has spread to Venezuela, where Public Prosecutor Tarek William Saab recently announced the arrest of Petroleum moguls. Five top executives have been arrested on allegations of seeking finance with Citgo as a guarantee in what was described as “unfavourable conditions’’.
Venezuela’s production is collapsing in response to its waning economy and its government falls into a pit of debt default.
As Venezuela’s economy derails, its importance to OPEC’s mission grows. The strife-torn country accounted for almost a third of last month’s supply cuts.
OPEC meet next week, and speculation is mounting over whether the cartel, along with its key partner Russia, will deliver extend its rebalancing act to the end of 2018.
If the organisation fails to agree on increasing the scope of supply cuts, a lengthy period of sell-offs will surely follow. However, cracks in solidarity may show, as tensions brew within Russia’s oil producers.
The latest crude oil inventory report will be announced at 15.30 GMT.