Oil price racing to $55 on OPEC deal

Oil prices are racing towards the $55 a barrel mark Monday after slowing down early trading in Asia after Italian voters rejected the constitutional reforms presented by the Prime Minister who has now resigned.

Brent is trading at $54.81 in Europe with forecasts that oil price will probably now remain at 16 months high for sometime.

Brent (54.68 $/bbl) retreated from the highest close in 16 months as US producers continued to boost drilling after OPEC agreed to reduce output for the first time in eight years.

But Brent is still up slightly more than 14 per cent from its level ahead of last week’s Opec’s meeting, at which member nations of the international oil cartel finally agreed to cut production.

The price for a barrel of West Texas Intermediate is also up 13.2 per cent for the period.

OPEC’s agreement to cut production for the first time in eight years has the potential to balance the oil market, as long as everyone sticks to it, former Saudi Arabia Oil Minister Ali al-Naimi said.

“The only tool they have is to constrain production,” al-Naimi said of OPEC at an event in Washington, D.C. “The unfortunate part is we tend to cheat.”

Nigeria is expected to maintain 1.9m bbl/day output. Nigeria is producing oil from all major fields and the country will maintain oil production responsibly, Oil Minister Emmanuel Ibe Kachikwu says at PetroTech conference in New Delhi. Nigeria is also negotiating a huge advanced payment from India for future oil deliveries.