At the weekend crude oil prices continued to rise for the third week in a row.
Hadn’t settled above $60 since December 24, Light Brent crude rising by $2.24 or 3.8 per cent to settle at $61.52 a barrel, marking the highest price at which it has been sold this year. US crude oil futures also rose $1.57 or 3.1 per cent, to settle at $52.78 a barrel, up about 2.1 per cent for the week.
The oil prices rise caused by spending cuts by oil companies and further declines in the number of active US oil rigs, which fell by 98 to 1,358 on Friday, representing 406 rigs less than the figure recorded the same time last year, according to weekly data from Baker Hughes Inc.
Dr. Diran Fawibe, Chairman and Chief Executive Officer of International Energy Services Limited says that the current rise in the price of crude oil was as a result of the strategy of the Organisation of Petroleum Exporting Countries (OPEC) not to cut output so as not to lose market share to non-OPEC members.
He notes that the OPEC strategy was aimed at forcing high cost producers of shale gas in North America to curb output so that the market would stabilise.
OPEC, particularly Saudi Arabia and the Gulf producers that produce oil at a lower cost, used the strategy to force the high cost producers to reduce their output as oil prices sank below their cost of production, Diran Fawibe states.
According to Fawibe: “It is a strategy that was largely being promoted by Saudi Arabia and some gulf countries like the United Arab Emirates (UAE) and it was an attempt to force the US to stop dumping oil into the market.But whether it is the best strategy in the current situation is another matter. To my own mind, I feel that it can only work in the short run. Of course, we are beginning to see some evidence of that working squarely against North American shale oil producers, who are now reducing their activities in the market”.
Speaking further he explains:“You see, in the past, one of the drivers of oil price in the world market was not just the economic situation in the consuming countries. You may have some major developments in some oil producing countries that will disrupt supply and lead to speculation.”
He also adds that the speculation in turn, will lead to the rising oil prices. For example, if certain things happen in a major oil producing country that disrupts the flow of oil to the market, it can lead to price escalation.
“As a matter of fact, one only hopes that it does not remain at $50 to $60 and continues to rise. But the best we can achieve this year is about $70 a barrel,” he said.
Hadn’t settled above $60 since December 24, Light Brent crude rising by $2.24 or 3.8 per cent to settle at $61.52 a barrel, marking the highest price at which it has been sold this year. US crude oil futures also rose $1.57 or 3.1 per cent, to settle at $52.78 a barrel, up about 2.1 per cent for the week.
The oil prices rise caused by spending cuts by oil companies and further declines in the number of active US oil rigs, which fell by 98 to 1,358 on Friday, representing 406 rigs less than the figure recorded the same time last year, according to weekly data from Baker Hughes Inc.
Dr. Diran Fawibe, Chairman and Chief Executive Officer of International Energy Services Limited says that the current rise in the price of crude oil was as a result of the strategy of the Organisation of Petroleum Exporting Countries (OPEC) not to cut output so as not to lose market share to non-OPEC members.
He notes that the OPEC strategy was aimed at forcing high cost producers of shale gas in North America to curb output so that the market would stabilise.
According to Fawibe: “It is a strategy that was largely being promoted by Saudi Arabia and some gulf countries like the United Arab Emirates (UAE) and it was an attempt to force the US to stop dumping oil into the market.But whether it is the best strategy in the current situation is another matter. To my own mind, I feel that it can only work in the short run. Of course, we are beginning to see some evidence of that working squarely against North American shale oil producers, who are now reducing their activities in the market”.
Speaking further he explains:“You see, in the past, one of the drivers of oil price in the world market was not just the economic situation in the consuming countries. You may have some major developments in some oil producing countries that will disrupt supply and lead to speculation.”
He also adds that the speculation in turn, will lead to the rising oil prices. For example, if certain things happen in a major oil producing country that disrupts the flow of oil to the market, it can lead to price escalation.
“As a matter of fact, one only hopes that it does not remain at $50 to $60 and continues to rise. But the best we can achieve this year is about $70 a barrel,” he said.
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