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Oil Prices Rise on Tightening Global Supplies, World Bank Report

January 24, 2017 at 18:03 by Andrew Moran

Oil prices are rallying on Tuesday on tightening global supplies and a new report from the World Bank. Oil is making gains based on diminishing crude stockpiles thanks to cuts by Organization of Petroleum Exporting Countries (OPEC) members as well as a new international report forecasting an average oil price of $55.

February West Texas Intermediate (WTI) crude futures climbed $0.75, or 1.42%, to $53.50 per barrel at 16:37 GMT on Tuesday on the New York Mercantile Exchange. The last time US crude traded at this level was on January 6.

Brent, the international benchmark for oil prices, is also making some gains. March Brent crude futures rose $0.50, or 0.91%, to $55.73 a barrel on London’s ICE Futures exchange.

Oil prices are on the rise due to a report that OPEC and other oil-exporting nations had accomplished their mission of slashing 1.5 million barrels per day (bpd) from the global oil market. This means that OPEC and other non-OPEC producers are closer to their initial target of 1.8 million bpd by roughly 80%. Iraqi Oil Minister Jabbar Ali al-Luiebi noted that most major oil companies working in its territory were helping to succeed in the output reductions objective as part of November’s OPEC arrangement.

At the same time, US producers are increasing their supplies, something that experts warned would happen. In order to take advantage of higher oil prices, US drillers added the most rigs since 2013 and US oil production has gone up by more than 6% since the middle of last year. This means that US oil output has returned to its late 2014 levels.

Is this bad news for the global oil market? Some are not concerned, including Khalid al Falih, Saudi Arabia’s energy minister. Speaking recently at the World Economic Forum, the Saudi official told an audience that he does not believe the US would be adding millions of barrels to the oil market anytime soon.

This comes as the World Bank said in a new report that the average crude price in 2017 would be $55 per barrel, up by 26% from last year’s average price.

If you have any questions and comments on the commodities today, use the form below to reply.

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