Brent: Pressure on the Price will Continue
The data released by the US Department of Energy yesterday showed that oil reserves in the USA amounted to 2.299 million barrels last week. The rise was below expectation of +3.167 barrels. However, the reserves have reached 80-year high.
In the last few months, production of oil in the USA has remained at the level of 9 million barrels per day.
OPEC countries maintain high level of oil production despite preliminary agreement to freeze oil production. Mass media released information that Saudi Arabia and Kuwait agreed to resume oil production at the joint venture which can produce up to 300 000 barrels of oil every day. Iran refuses to freeze oil production until it reaches prior to sanction level of 4 million barrels per day.
Meanwhile, the forthcoming meeting between representatives of OPEC and other large oil producing countries, which will take place on 17 April in Qatar, provides support to the oil prices.
The prices of oil are also supported from the position of the US Fed on the interest rate increase. On Tuesday Mrs. Yellen said that the interest rate shall be raised gradually. However, she also expressed concern about the prospects of the global economy.
Therefore, in case the agreement to freeze oil production is reached, it will have only limited influence on the oil market as production in the OPEC countries have been at the level of 32.4-32.6 million barrels since last June. Oversupply of oil in the world will increase and oil prices will be under pressure in the medium-term.
In the last two weeks the price of crude oil Brent has been in the narrow range between 41.50 and 39.00. It is likely that the price will maintain this level until the meeting of the representatives of oil producing countries in Qatar on 17 April. The negative outcome of this meeting will trigger sharp decline in the price of crude oil Brent. The price may reach the lows of 27 USD per barrel.
The material has been provided by LiteForex - Finance Services Company - www.liteforex.com