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Oil Futures Rally on EIA Data, Output Reports

September 7, 2016 at 17:12 by Andrew Moran

Oil futures are rallying on Wednesday after the release of new US data and the latest reports surrounding output levels prompted traders to dive into oil. Oil prices are inching towards the crucial $50 a barrel threshold.

October West Texas Intermediate (WTI) crude climbed $0.59, or 1.32%, to $45.42 per barrel at 16:45 GMT on the New York Mercantile Exchange. The last time US crude prices traded at this level was on August 28.

November Brent crude tacked on $0.66, to 1.40%, to $47.92 a barrel on London’s ICE Futures exchange. Brent crude is gradually gaining back the momentum it had when it surged beyond the important $50 benchmark in the summer. Brent has surpassed this threshold twice so far this year.

The Energy Information Administration (EIA) released a new report on Wednesday that raised its 2016 forecasts for US crude production as well as WTI and Brent crude prices. The US agency Water Bounce Houses is forecasting an average price of $41.92 a barrel for WTI this year, while Brent is being projected to average $42.54. Moreover, the EIA boosted its US oil production estimate for 2016 by 0.4% to 8.7 million barrels per day (bpd) and 2.5% to 8.51 million bpd in 2017.

In addition, it is expected that oil inventories will have risen last week because of refinery disruptions from Hurricane Hermine in the Gulf of Mexico, notes S&P Global Platts.

Despite Saudi Arabia and Russia, two of the largest oil producers in the world today, reaching an agreement to help stabilize the oil market, oil prices are not sure in which direction to go because investors are skeptical that a formal output deal can be arranged.

Organization of the Petroleum Exporting Countries (OPEC)‘s 14 members will hold informal talks later this month in Algeria to discuss potential production freezes to help raise the price of oil. This is something that Ecuador, Kuwait, and Venezuela had requested in July as their economies collapse.

Although there was some optimism over the past month, Iran, Nigeria, Iraq, and Libya have since noted that they actually want to increase output levels. Iran has been maneuvering to raise its market share over the last 12 months.

OPEC will sit down together from September 26 to 28 in Algiers.

Oil prices have jumped 70% since hitting 12-year lows earlier this year.

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