Oil Prices at One-Month High on Production Cuts Expectations

Published Date : Oct 06, 2015

Prices of oil reached a one month high on Tuesday on the expectations of declining supply in the global as well as US markets. 

The United States Energy Information Administration said on Tuesday that the domestic production of crude oil dropped 120,000 barrels per day from the month of August to September. The production level in the US market settled at the lowest point in a year to reach 9 million barrels per day in September. The agency brought down its production predictions slightly with next year’s estimates reaching 8.8 million barrels per day. 

The news gave rise to expectations that a global oversupply of crude oil would possibly start shrinking. Production in the United States over the past few years has been thriving with oil being derived from shale rock formations. However, the global glut has managed to push oil prices below US$ 50 per barrel, forcing some producers in the United States to cut production.

Prices on Tuesday also received a push from talks of a possible meeting between the Organization of the Petroleum Exporting Countries and Russia. Industry reports and executives have indicated towards a potential meeting that will be aimed at discussing the present conditions of the oil market. This has caused some to conjecture that the other biggest producers of oil in the world might possibly join the United States in cutting back output. 

Director of Mizuho Securities USA Inc.’s futures division Bob Yawger said that this has caused some of the folks to wake up in this space. 

Sweet and light crude oil meant for delivery next month rose 4.9 per cent or US$ 2.27 to reach US$ 48.53 per barrel on the New York Mercantile Exchange. This was the largest single day gain for the US benchmark since September 16.