Oil hits 18-month high at $58.37

Jon Howard
January 4, 2017

Only a break below this zone would take us from Bullish to Neutral. That isn't a typo.

Oil is projected to contribute about N1.985 trillion from the expected N4.94 trillion aggregate revenue available to fund the federal budget.Before the latest good news, Nigeria had not record a change in oil production, as the difference between the current record of 1.9bpd according to Petroleum Resources Minister, Ibe Kachikwu, and the 2017 budget benchmark remains wide apart.

By 2016, oil companies large and small had shed a lot of that extra fat, running leaner than at any point in the last few years.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at $52.65 per barrel at 0237 GMT, up 32 cents, or 0.6 percent, from the last settlement. That was enough to make the industry cash flow neutral for the first time in its history.

"Both investors and oil companies are now hoping for another big rally in 2017".

A stronger dollar also contributed to oil's decline today.

"The start to the new year in oil is one where we should see a bull market more like the ones we used to know". These cuts by the smaller players puts pressure on Saudi Arabia and Russian Federation to comply as well as it really was these two countries that really pushed to make this historic OPEC/non-OPEC accord a reality. "The market was run up - it just got overdone".

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The U.S. Energy Information Administration found that U.S. crude oil production rose 2.7 percent in October to about 8.8 million bpd but was still down by about 6 percent from year-ago levels. Oklahoma, on the other hand, added two more rigs.

Mr Schieldrop explained that prices will have to fall in order to halt U.S. shale production, which is set to rise by 3 0 rigs per month between January and June. The collective non-OPEC pledge is a 558,000 barrels per day cut.

The Kurds built their own oil pipeline to Turkey and began exporting oil via Turkey without Baghdad's approval in 2013; in 2015, when allegations emerged that Turkey was paying the Islamic State for its (very cheap) oil, the country deflected by saying it was only paying for Kurdish oil.

"Markets will be looking for anecdotal evidence for production cuts", said Ric Spooner, chief market analyst at Sydney's CMC Markets. Of course, OPEC cheating is a possibility.

"We're seeing more of an urgency and willingness by the participants in the cuts than has been the case in the past", Mark Watkins, the Park City, Utah-based regional investment manager for the Private Client Group at US Bank, which oversees $136bn in assets, said by telephone. Weekly EIA data shows gains of almost 300,000 bpd since the end of summer. However, it also means that the amount of oil production set to come on-stream over the medium term may prove to be insufficient to meet growth in demand. It agreed to reduce its output in the coming months by 300,000bpd under the deal.

Even with those negative risks in mind, the shale industry is getting back to work.

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