• Monday, June 24, 2024
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BusinessDay

Oil rises back towards $56, OPEC sees price at $200 soon

Plunging oil price rose towards $56 per barrel on Thursday, recovering from part of the previous session’s drop. OPEC forecast that the price would soon reach $200 per barrel, raising hope for Nigeria with respect to earning more revenue from crude oil after it was hit by the drop.

According to Abdulla al-Badri, OPEC’s secretary- general, “We’ve already hit the bottom. I see a real possibility that oil price could explode higher to upwards of $200 per barrel in the future.” He’s far from the only one that sees a return of triple-digit oil prices. He said the oil market doesn’t need to look for oil prices to bottom as the market had already bottomed.

“Now the prices are around $45-$56, and I think maybe they [have] reached the bottom and we [will] see some rebound very soon”. The OPEC boss explained that he’s not saying that OPEC will come in and res- cue the oil market by reversing its previous decision to hold steady on production. But instead, he sees the signs that the oil market is self-correcting as oil companies have made deep cuts to spending, which will eventually lead to lower production growth.

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Although traders and analysts said the prospect of a further, sustained rally from near six-year lows looked weak. Crude snapped a four- day winning streak on Wednesday, when the U.S. government said crude inventories increased by 6.3 million barrels, rising for a fourth consecutive week to hit a record high. While the global market has more than enough crude, a collapse in Libyan production and a raid on an oilfield by gunmen, plus an attack on a tanker off Nigeria renewed concern about threats to supply. Brent crude rose $1.69 to $55.85 a barrel by 1345 GMT, having fallen more than a dollar intra-day earlier and settling 5.5 percent lower on Wednesday.

U.S. crude added $1.35 to $49.80. “There’s more and more money coming in on the long and the short side, and I think the result of that is we’ll probably see increased volatility,” said Olivier Jakob, oil analyst at Petromatrix. “If we start to have more problems in Nigeria, then it starts to reduce the spare capacity that there is and then it’s harder to make the case that oil should be at $30.”

Oil began to rise last week from near-six-year lows, in part due to a down- turn in U.S. rig activity that could eventually dampen rapid growth in shale oil production, only to tumble on Wednesday. Other participants said it was too soon to expect a sustained price rise. “There’s no basis for a sustained recovery at the moment,” said Carsten Fritsch, analyst at Commerzbank. Christopher Bellew, a senior broker at Jefferies Bache, also did not expect prolonged gains. “I think prices will consolidate around these sorts of levels before moving lower. It takes a lot of time for fewer rigs to translate into lower oil production,” he said. A workers’ strike in the United States at nine plants, including seven refineries accounting for 10 percent of the country’s refining capacity, added to concerns over crude demand.