A look at oil prices

Starting this week, the ACP will publish an analysis every Monday of the main variables that are influencing oil prices.

A possible extension of the agreement among the countries of the Organization of the Petroleum Exporting Countries, OPEC, and allied producers (led by Russia) to cut their production volumes marks the start of the week for crude prices, which began with a slight increase of 13 cents for the Brent reference traded in the United Kingdom.

On Sunday, after a meeting of the Joint Ministerial Monitoring Committee of OPEC and non-OPEC countries, the organization announced in a press release that during the last month, compliance levels with the agreed production cuts exceeded expectations. The 24 countries that are part of this alliance agreed since December of last year to “accelerate the stabilization of the global oil market by making voluntary adjustments to their production, so that it does not exceed 1.8 million barrels per day.".

In an interview with Bloomberg, the Minister of Energy of the Russian Federation, Alexander Novak, announced that the group's intention is to maintain an alliance throughout 2018 and even opened the door for cooperation to continue in the long term. “The two largest producers and exporters of oil can continue their cooperation for the good of the crude industry and for the sake of stability,” he noted.

But the improvement in oil prices observed in recent weeks is also prompting reactions from producers. According to information revealed last Thursday by the U.S. Energy Information Administration (EIA), the production of that country reached 9.75 million barrels of crude per day last week, a figure that, according to some analysts, could reach 10 million barrels in the short term, especially with the current price volume.

With lower crude demand due to the end of winter, and increased production from the United States, it is not so clear that crude prices will remain around 70 dollars per barrel in the long term.

Other variables such as the budget crisis of the U.S. Government blocked by Congress will also mark the price trend this week, as they affect market sentiment regarding the behavior of the U.S. economy.