Oil Rises on Expected OPEC Cuts
Oil prices rose on Friday amid expectations of supply cuts from OPEC.US West Texas Intermediate crude oil futures were at $56.84 per barrel, up 38 cents, or 0.7%, from their last settlement. Brent crude oil futures were up 48 cents, or 0.7%, at $67.10 per barrel.
Prices were mainly supported by expectations the Organization of the Petroleum Exporting Countries would start withholding supply soon, fearing a renewed rout such as in 2014 when prices crashed under the weight of oversupply.
OPEC’s de-facto leader Saudi Arabia wants the organization and its allies to cut output by about 1.4 million barrels per day, around 1.5% of global supply.
However, the US bank Morgan Stanley warned a cut by the Middle East dominated producer cartel may not have the desired effect.
“The main oil price benchmarks - Brent and WTI - are both light-sweet crudes and reflect this glut,” the bank said. “OPEC production cuts are usually implemented by removing medium and heavier barrels from the market but that does not address the oversupply of light-sweet.”
Due to the structural oversupply that has emerged in the market from record production by many countries, Morgan Stanley said, “OPEC cuts are inherently temporary (because) all they can do is shift production from one period to another”.
source: Financial Tribune
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