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Crude Oil Prices Continue Their Recovery – US Proves Resilient to Price Slumps
By Isaac Ndegwa
Prospects continue to look high for oil producers as crude oil prices continue to recover. A lot of the excitement is felt in the USA too, as new reports show that the USA is likely to remain resilient even if the are weak oil prices. The current recovery in crude oil prices also resonates with the news that informal meetings have been scheduled between OPEC and other producers not in OPEC. There are hopes that both sides of the divide will come up with some agreements towards measures to be taken for price stabilization. Over the week ahead, the only substantial event risk that may reverse these gains in the crude sector include a meeting between supply side and market side players, mostly in Iran, Saudi and Russia. Geopolitical differences are known to push major players to alter supply or price to settle political scores, like was the case in the Crimean stalemate. There is evidence of returning capacity in the US supply and the number of oil rigs producing at their threshold capacity has trending towards 5-month highs (going by Friday statistics). That now questions the hopes that reducing the output will automatically translate to high prices.
Crude oil prices are currently at their highest level in the last four weeks. In Monday trading so far, a close above the 45.41 mark will give bulls more reasons to push the prices towards the 46.88 last high. Bearish action will aim to drive the price levels towards the 41.09 lows last experienced on August 11th.
US MORE RESILIENT TO SLUMPS
A report released this past weekend by the US Energy Information Administration shows that the US is more resilient to crude oil price slumps compared to other producers. The explanation is that lighter grades of Crude, often found in Shale deposits make up the bulk of US production. The lighter grades are expected to double through to the year 2040 (10.4 million barrels per day.) The case is similar to the US natural gas and tight oil. Most US producers expect more production of tight oil and natural gas due to more efficient operations.
Since the US lifted its ban on Crude exports, the markets continued to flourish, with Canada taking about 60% of the destination market. Canada and Curacao has anyway enjoyed an exemption from the US ban in 1985.
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By Isaac Ndegwa
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