Oil prices reach two year high
OPEC extend production cuts in boost to crude markets
by Abi Moses on 10th January, 2018
News that the Organization of the Petroleum Exporting Countries (OPEC), along with several other oil-producing countries are to extend production cuts helped oil prices hit their highest level since 2014 on Wednesday, although analysts remain cautious of the market gains.
Increased demand couple with the production cuts saw US West Texas Intermediate (WTI) jump 0.7% to $63.40 a barrel. Brent Crude futures were trading at $69.15 a barrel and reached its highest intra-day spike ($69.29) since May 2015 on Tuesday.
William O'Loughlin, investment analyst at Australia's Rivkin Securities, explained, "The extension of the OPEC agreement and declining inventories are all helping to drive the price higher."
The OPEC agreement was put in place to lower production in a hugely over-supplied market – seeing prices suffer for the past two years.
Market prices were boosted after confirmation late on Tuesday from the American Petroleum Institute that crude inventories had fallen by 11.2 million barrels last week. Oil prices could be boosted further if the US Energy Information Administration data (due 15:30GMT on Wednesday) proves favourable.
Meanwhile, in Asia; the world's largest oil consumer region is suffering as a result of high prices to refineries. Many experts have therefore issued a warning of an overheated market.
Sukrit Vijayakar, director of energy consultancy, Trifecta, warned, "One area of concern, particularly in Asia, is that of (low) refining margins. This drop in margins could reduce Asian refiners' demand for incremental crude in the near term and weigh on global prices."
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