Saudi Arabia: Diverging forces keep oil prices stable
March 1, 2017
Oil prices have stabilized in recent weeks after hitting an over one-and-a-half-year high on 3 February. The Organization of the Petroleum Exporting Countries’ (OPEC) oil basket traded at USD 53.8 per barrel on 1 March, an increase of 2.0% from the same day in February and an astonishing 70.0% recovery from the same day in 2016.
Oil prices stabilized at between USD 52 per barrel and USD 54 per barrel in February following the rally that had followed the 30 November oil deal. The recent trend reflects diverging forces in the oil market. While recent data corroborate that OPEC members are sticking to the oil deal, with most producers pumping oil at the agreed production quotas, drilling activity is increasing in the United States in response to higher oil prices. According to private sector estimates, the number of oil rigs in the United States has increased by 125 since the OPEC deal in November.
According to the latest OPEC Monthly Oil Market Report, combined oil output in OPEC countries in January decreased to 32.14 mbpd from 33.03 mbpd in December, mainly reflecting a plunge in production in Iraq, Kuwait, Saudi Arabia and the United Arab Emirates. Of this, Saudi Arabia produced 9.95 mbpd in January, which was below December’s 10.44 mbpd. Conversely, Iran, Libya and Nigeria recorded a significant increase in crude production in the same month.