Oil marched higher overnight, after Saudi support of the extension of supply cuts until the end of 2018. If OPEC and its allies agree to expand the scope of production cuts, there will be a shift towards insufficient supply by 2019. Brent oil will probably reach $60 per barrel if the cartel makes a consolidated effort to curtail its supply given the solid global demand.
The problem is sustaining the $60 level in the short-medium term. Markets are worried that shale producers will increase output at the $60-mark, derailing efforts made by OPEC and Russia.
When oil approaches $60 per barrel, traders become unnerved and start to sell-off to avoid the slump. We’re seeing this today, as Brent oil ticked towards $60 per barrel, investors grew wary, dumping bullish bets and driving prices down. We’ll need to see a major news event, like disruptions to production in Iraq, to see oil break and, most importantly, maintain the $60 mark.
Brent oil has risen for three days in a row after the Saudi comments. However, as investors grow concerned about increased shale production as oil approaches $60 per barrel, Brent prices fell. The international benchmark is now 0.5% lower, trading at $59.20 per barrel, just off the highest point since July 2015.
Meanwhile, crude oil has declined by 0.5%, trading at $52.58 per barrel. The US benchmark is still at a six-month high as investors price in for an extension of supply cuts.
Crude oil inventories and natural gas stockpiles increased by more than expected, capping gains for oil.
OPEC meet on the 30th of November in Vienna to discuss its oil production plan.