[contextly_sidebar id=”O3KDTSDblLFJHYpOaakj7AzEDPzlXwZH”]Oil prices surged today, as bullish news rolled in from multiple sources around the world.
WTI closed the day at $55.64/bbl, rising by $1.10/bbl or 2% in the day. This is the highest WTI has closed at since July 2015, marking it a major milestone. Brent rose even more, adding 2.4% to close the day at $62.07/bbl. Like WTI, Brent has not closed at this price since July 2015, more than two years ago.
OPEC considers extending cuts
Several developments worked together to push oil prices higher. OPEC countries have been seriously considering extending production cuts beyond the current expiration of March 2018. The Crown Prince of Saudi Arabia recently expressed support for extending cuts, and Iraqi and Kuwaiti leaders have made similar remarks. Russian leader Vladimir Putin has also supported further cuts, suggesting the largest non-OPEC member will continue to restrict its production.
Nigeria disruptions likely to continue
News from individual OPEC members have also raised oil prices. Nigeria, which is exempt from the cut agreement, has worked throughout the year to end militant attacks on its oil infrastructure and raise its production. That job has just become more difficult, as the ‘Delta Avengers’ announced the ceasefire the group agreed to last year is over. Attacks by the group previously cut production from a peak of 2.2 MMBOPD to nearly 1 MMBOPD, according to Reuters.
The potential for this group to resume supply disruptions could reverse Nigeria’s efforts to add production, and take away some of the 800 MBOPD the country has added in the last year.
Venezuela restructuring announced
News from Venezuela has boosted oil prices as well, creating uncertainty in South America’s largest oil producer. Venezuelan President Nicolas Maduro said yesterday that the country will seek to restructure its global debt in the coming weeks, in a move that was widely expected. The oil price downturn has created great hardship in Venezuela, and the country has struggling with its debt load.
It is currently unclear exactly what the nature of a restructuring would be, and Venezuelan officials have not clarified their intentions. The U.S. government has placed sanctions on numerous Venezuelan officials and has effectively prevented the country from securing additional financing, which will make any refinancing immensely complicated. Some bonds are secured by stakes in PDVSA’s assets, including its U.S. refining arm Citgo, which creditors will undoubtedly try to acquire. No matter what happens, though, the current uncertainty in the future of Venezuelan production is forcing oil prices up.
Rig count falls
Bullish news has also come from the U.S. today, in the form of Baker Hughes Rig Count. The number of rigs active in the U.S. has been falling gradually for the past few months, as producers scale back aggressive growth plans and seek equilibrium.
Eleven drilling rigs shut down in U.S., leaving 898 operational. This is the lowest rig count since May, and represents a drop of 60 from the peak in July. Oil-targeting rigs dropped by eight, the largest decrease in such rigs since 2016.
