Crude oil prices surged roughly 2% Tuesday supported by indications the market is rebalancing after years of oversupply and lower-for-longer prices, Kallanish Energy learns.
The U.S.’s West Texas Intermediate peaked at $51.06 a barrel, before trading at $50.86/Bbl at 1.15 p.m. (EDT). That’s an increase of $1.38, or 2.78%, in the contract for November delivery. Crude futures were trading at $49.58/Bbl in the previous session.
Brent crude futures increased 1.72%, or $0.96, to $56.75/Bbl. The December contract peaked at $56.91/Bbl earlier, compared to $55.79/Bbl at the previous close.
OPEC General Secretary Mohammed Barkindo said Tuesday the pace of rebalancing is increasing and “more extraordinary measures” may be implemented next year, which are believed to have supported higher prices. The official urged U.S. shale producers to take responsibility and help to sustain the rebalancing long-term.
Saudi Arabia, the world’s largest oil exporter, also helped prices to rebound following reports it’s cutting exports by 560,000 barrels per day (BPD) in November. The volume is in line with the Saudi commitment to the OPEC/non-OPEC deal.
Short-term price support also came from the U.S., after Hurricane Nate shut-in 85%, or 1.49 MMBPD, of the U.S. Gulf of Mexico oil production.
Ian Taylor, head of oil trader Vitor, told Reuters the U.S. oil output could be set for a last spike in 2018, before growth flattens for a number of years as rising costs make a big chunk of production unfeasible. Again, that might give oil markets positive sentiment long-term.