U.S. benchmark West Texas Intermediate for November delivery climbed 23 cents to $48.04 and Brent crude for November gained 21 cents to $51.54 in late-morning Asian trade. More optimistic forecasts point to a longer term sustained increase in prices which could lead to oil hitting $70 a barrel the end of next year. That means oil gets more expensive per barrel, relative to the value of a dollar.
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“This has caught the attention of the market place (and) is viewed as a situation that could potentially impact the flow of oil from the region as well as degrading the already declining relationship between Russian Federation and the U.S”. It marked the fifth straight weekly decline and the sharpest drop since the week ending on April 24.
The market shrugged off concern about the higher-than-expected US crude stock build as reported by the U.S. Energy Information Administration on Wednesday.
The Trade Weighted U.S. Dollar Index has increased 15% over the past year and is at its highest level in over 10 years, writes Karen Wallace for Morningstar.
Traders were mulling remarks by Abdalla Salem El-Badri, secretary-general of the Organization of the Petroleum Exporting Countries, who stated that demand will rise more than projected this year. Price has since partially recovered and, after ranging sideways for all of September, has broken out to the upside, now tapping on $50 per barrel. The fund has garnered about $33 million in its asset base while it sees a moderate volume of around 21,000 shares a day.
“Non-OPEC [states] increased their output by 6.0 million barrels per day in the past six years, and OPEC believes this is the reason for the glut in the oil market”, he said.
USA inventories expanded by 3.07 million barrels through October. 2 as production rose and refinery processing rates fell, according to government data.
Even if a few of this production was to come back, Ross said it would take about nine months.
OPEC is showing no sign of cutting output with lower prices and there is the prospect of additional Iranian supplies coming to the market following the July nuclear agreement with world powers, Emori said.
The weaker dollar also provided support for oil on Friday. On top of that, new demand for oil is in decline as the economy cools down. The primary target of the OPEC plan was oil production from shale in the United States, which relies on hydraulic fracturing. “In contrast, South Korea saw a very bullish first half of 2015, with naphtha consumption in the petrochemical industry lending support to growth”.
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Sada added that current low market prices have spurred oil firms to reduce their capital expenditure by nearly 20 per cent this year from $650 billion in 2014. Global demand for energy will grow by a third over the next two decades, he said.
