Published: Wed, March 08, 2017
Economy | By Melissa Porter

What's Affecting Oil Prices This Week?

What's Affecting Oil Prices This Week?

"While the U.S. oil industry is seeing a revival, the dramatic declines in global oil industry investment over the last two years, and only modest signs of recovery in 2017, mean that it is far from clear that enough projects will enter the pipeline in the next few years to avoid a potentially tight market by 2020 and with it, the possibility of a price spike", the agency said.

OPEC and non-OPEC members will meet in May to assess whether further cuts will be needed after June, when the initial six-month agreement terminates.

Rising pump prices have followed on rising prices for crude oil in the wake of announced production cuts totaling about 1.8 million barrels a day from OPEC members and other oil-producing nations.

When OPEC in November joined with several non-OPEC producers to agree to a historic cut in output, the group called time on a fight for market share that drove oil prices to a 12-year low and many shale producers to the wall. WTI in NY averaged $53.70 - down 8 cents - for the week, while Brent crude traded in London averaged $55.97 - down 24 cents from the previous week. 2016 production averaged 8.9 million barrels a day. Barkindo said it was premature to say if the cut should be extended.

This will lead, he warned, to a future marked by severe price spikes, "acute energy poverty" in the developing world and high market volatility.

Oil declined after an industry report was said to show that USA crude inventories increased.

He added that this decision depends on the stability of the oil market.

Prior to the landmark deal, the volume of production in the country was at the level of 37.72 million tons of oil, while daily output was at 829,100 barrels.

Saudi energy minister Kalid Al-Falih has described talk of peak oil demand, in the face of rising acceptance of electric vehicles and renewable energy schemes, as risky and misguided.

"I'm still not seeing the confidence", Falih said, referring to oil companies investing in long-term projects.

Growing U.S. production is a key concern in the market that could offset efforts by the Organization of the Petroleum Exporting Countries and its allies to ease global supplies. Bullish sentiment over the 1.8 million b/d of producer cuts underway has taken a few knocks, with Russian Federation last week reporting its February production flat from January, implying no progress from a cutback of just 100,000 b/d, a third of what the country has pledged. Lower crude oil prices, higher break-even costs, and higher production costs for USA shale oil producers compared to other oil producers led to the fall in U.S. crude oil production.

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