The ideal price for oil is about $60 a barrel, because any higher would unleash a surfeit of shale production, Nigerian Minister of State for Petroleum Emmanuel Kachikwu said in a Bloomberg TV interview.
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US benchmark West Texas Intermediate for January was up $2.50 at $54.00 while Brent crude for February rose $2.41 to $56.74.
Brent crude futures rose $1.36 to settle at $55.69, a 2.5 per cent rise, after hitting a session peak of $57.89, the highest since July 2015. Cenovus Energy is basing its budget of $1.3 billion on a price of US$47.25 per barrel. It was more than double the gain of telecom stocks, which had the second-biggest move for the day.
The Shanghai Composite was down 2.49% at 3,152.47m and the Shenzhen Composite slid 4.86% to 1,929.32.
The market got an extra boost of confidence on reports that Saudi Arabia indicated that, if necessary, the kingdom may be willing to take a deeper cut than the 486,000-barrel cut it had agreed in the November meeting.
Oil futures spiked by over 4% on Monday (12 December) following the first production cut pact between Opec and non-Opec crude producers in 15 years.
The deal in Vienna quieted some concerns over whether OPEC could persuade non-members to join in a cut, with 11 non-members, including Russia, Mexico, Oman and Kazakhstan, collectively agreeing cut roughly 558,000 bpd. Given that shipping by pipe is the cheapest way to transport crude, we are likely to see lower Russian production reflected in waterborne deliveries first, as the more expensive method is cut.
Analysts at Sanford C. Bernstein & Co.
“The cuts will aim at the figures we agreed with OPEC definitely, but (for) the areas of the cuts there are many options on the table”, Luaibi told Reuters on Saturday.
“The exchange rate is now N305 but the daily production is still 2.2m barrel per day and the crude oil is left at $42.5 per barrel, “he said”.
Others are less bullish on prices. The news is helping to buoy sentiment among Canadian oil producers just as they finalize spending plans for the coming year.
“Our main concern is that market has become comfortably numb in relation to rising rig counts”, said Bjarne Schieldrop, chief commodities analyst at SEB Markets.
Back on Nymex, petroleum-product futures followed oil prices higher. Mutual funds that he oversees have been paring back their stock investments in recent days and weeks as the price tags for them have shot higher.
But the upward trend might soon peter out, leaving prices well short of the highs of around $100 a barrel last seen two years ago.
Citigroup analysts believe Saudi Arabia’s forecast for a limited 2017 shale rebound “seems gravely misplaced”, noting that “shale producers will be grateful for OPEC and non-OPEC producers making room in the market for them”. OPEC output rose last month to 33.787 million barrels a day on increases from Libya, Nigeria and Angola, according to independent estimates known as secondary sources, said a person familiar with the data.
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“There are too many moving parts for OPEC’s new policy to be sustainable in the long term”. Despite the economic crisis in Italy, the company, established in 2007, exports to Asia and Europe.
