War on glut: Has Opec struck oil?

Oil prices have settled nearly flat amidst unease ahead of the upcoming OPEC meeting in Vienna

Oil prices settled up 2% on Wednesday as traders and investors ignored a build in USA crude stockpiles from last week to focus on the likelihood of OPEC extending crude production cuts when it meets later this week to assess price support measures.

Oil prices have jumped more than 15 per cent in the past three months with Brent crude trading above $56 a barrel in recent days, but prices are still half the level they were in mid-2014.

Nigerian Minister of State for Petroleum Emmanuel Ibe Kachikwu told Bloomberg television that once oil production hits 1.8 million barrels a day, they will place a cap on production themselves, so they're in line with other OPEC members.

While oil prices have rebounded to a six-month high since then, risks remain and crude could fall as low as $40 a barrel next year, according to the nation's central bank.

He also said oil in floating storage was falling and cited a shift of benchmark Brent prices into backwardation, a market condition in which it is more attractive to sell oil immediately rather than storing it for later sale, indicating tighter supplies. Opec and its allies have been considering extending the deal beyond that date.

The Energy Information Administration (EIA) on Wednesday reported USA crude production rose to 9.51-million barrels per day in the week ended September 15 from 8.78-million barrels per day a week earlier.

OPEC and Russian Federation said they were about halfway toward clearing a global oil glut and urged fellow producers to stay focused and finish the job, while stopping short of additional action to reassure a jittery market.

Oil-producing countries from inside and outside OPEC meet in Vienna on Friday as signs grow that their landmark agreement to cap output may finally be boosting the price of crude.

He reportedly said the group won't decide on extending output limits before January. Operators are using rigs more efficiently, but rig count numbers remain an important indication of the health of the USA oil industry. The OPEC cuts have certainly led to a decline in supply on the market and a sense of rebalancing, but analysts warn against complacency as American shale players can ramp up production quickly in a stronger priced environment.

The oil market will carefully watch any moves by the United States to escalate geopolitical tensions with Iran in coming weeks and months. Nigeria, which is now exempt from making cuts, reiterated that it would accept a cap once output stabilises around 1.8 million barrels a day.

He said the speculative effect in the handling of their products must be eliminated, referring to the pact he made a positive balance, despite aspects yet to be improved.

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