Global oil
prices gain on Tuesday following the news of OPEC planning to extend production
cuts and work on a viable exit strategy.
Brent crude
oil gained 0.52 percent to $57.57 a barrel at 03:03 p.m. Nigerian time. While
the West Texas Intermediate oil rose 0.77 percent to $52.30 a barrel, up from
38 cents.
In the past,
traders have criticized the cartel for not having an exit strategy for its
aggressive production cuts. Rather, hoping global demand would increase in the
long run and eventually absorb supplies.
“The market
will probably take it positively if OPEC can explain their thinking on how it
works when they’re not voluntarily holding back oil from the market anymore,”
said Torbjorn Kjus, an analyst at DNB Markets. “There’s a fear in the market
that when the deal runs out, then it’s every man for himself again, and that’s
not what they’re thinking.”
Last week,
OPEC Secretary-General Mohammad Barkindo said balanced oil market is in sight
and that production cuts have reduced half the oil-inventory surplus.
“A balanced
oil market is now fully in sight,” Barkindo said at the Oil & Money
conference in London on Thursday. “Stability is steadily returning and there is
far more light at the end of the dark tunnel we have been traveling down for
the past three years.”
U.S.
inventories dropped by 3 million barrels last week, making it a fifth
consecutive decline, according to a survey published by Bloomberg before
government data due Wednesday.
“The oil
inventory surplus in industrialized nations compared with the five-year average
has fallen below 160 million barrels, less than half the level at the start of
the year, he said. Stronger demand means that decline has accelerated since
May,” Barkindo said.
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