A massive output cut was a massive way on skimping over the oil supply glut last week which steered prices on a 10-month low.
OIL prices, which dropped below Nigeria's 2017 budget benchmark price of $44.50 per barrel, hovering around $43/barrel in the past two weeks, yesterday rose significantly across all grades and markets.
Crude oil futures on Friday were on track for their biggest weekly gain since mid-May, ending five weeks of losses with prices underpinned by a decline in USA output.
The current United States crude futures were up by a massive 5.1% increase this week alone, while the Brent crude also did well on this week having 4.8% increase on its belt.
"Oil prices received momentum from Wednesday's U.S. data and the market rejected the lows that we saw".
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He noted that, "The key question most traders are asking is when oil will finally find support? We could see more gains if there is a further drop in oil output, and the other factor is a weaker USA dollar".
We expect this will leave prices trading near $45 (a barrel) until there is evidence of a decline in the USA horizontal oil rig count, sustained stock draws or additional OPEC production cuts. He adds, "despite the recent oil price drop, prices are likely to rise in 2017, with more upside potential in 2018". At the same time, gasoline reserves in the country decreased by 0.9 million barrels, or by 0.37 percent - to 241 million barrels. The bank is now expecting a price of around US$47.50 a barrel in the coming three months, down from a more optimistic US$55 a barrel.
Global oil supplies remain ample despite output cuts of 1.8 million bpd by the Organization of the Petroleum Exporting Countries and other producers since January.
"Rising U.S. production will delay the market rebalancing until the end of the year, but the OPEC production cuts should be enough to bring stocks back to their five-year average, even with an increase in U.S. output", said Capital Economics analyst Thomas Pugh.
"The market's calls for further cuts from OPEC continue to be rejected by the oil group", ANZ said in a note.
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