Brent exceeds $60 per barrel after New Year panic

Brent exceeds $60 per barrel after New Year panic

International Brent crude futures climbed back to $60 per barrel today, with OPEC cutting output and on easing concerns over weak demand growth.

Around 0940 GMT, Brent crude for delivery in March hit $60 for the first time in 3.5 weeks and was up 20% compared with two weeks ago, prior to an oil production cut by the OPEC and non-cartel producers from January 1, AFP reported.

After reaching $60.05, Brent cooled slightly to $59.79, up $1.07 from Tuesday's close. WTI for February delivery was up $1.23 to $51.01 per barrel.

Brent and WTI slumped late last year, hitting 18-month low points at $49.93 and $42.36 per barrel respectively.

Deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, speaking to Vestnik Kavkaza, noted that oil increased by $10 per barrel from the December lows due to positive expectations from the beginning of the year. "Fundamentally, nothing new has happened. So far this growth is an indicator of a general high price volatility, first of all, on oil futures, and it’s still too early to talk about a clear upward price trend. Prices may even drop below $60 per barrel in the next month or two, with the likely corridor between $52 and $65 per barrel. Only prices above this level will indicate a serious reversal in the market," he emphasized.

"In general, now there are clear expectations of oversupply in the market. A fundamental basis says that prices are unlikely to grow higher than the average last year. The growth trend may last several weeks maximum," Alexey Belogoryev warned.

The executive vice-president of NewTech Services, professor of the Gubkin Russian State University of Oil and Gas, Valery Bessel, on the contrary, noted that the global oil demand is increasing. "Oil production slows down and accelerates, but on the whole the supply-demand ratio is very stable. It would be wrong to say that supply dramatically exceeds demand now. One would think that low prices are beneficial for the U.S. and China as the largest oil consumers, but in the U.S. oil production is about 570 million tons per year, and in China - 200 million tons per year, that is, a huge number of people there are engaged in this business,” he said.

"Even for shale deposits, the oil price of $60-70 per barrel is very comfortable. If oil shale deposits are produced, oilfield service companies will be provided with work. Therefore, the current price is very comfortable and will not increase much, unless there are some worthy informational reasons. Still, there will be a slow rise in prices, since the cost of oil production is steadily growing around the world.Oil prices will stay at a comfortable for all level in order to give work to oil workers and many adjacent industries," Valery Bessel concluded.

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