Published By : 15 Sep 2015 | Published By : QYRESEARCH
The prices of oil went up on Tuesday amid indications of production cuts in the US and bargain purchasing helped in lifting the market for a low of two weeks.
Sweet, light oil meant for delivery in the month of October reported an increase of 1.30 per cent or 59 cents to reach US$ 44.49 per barrel on the New York Mercantile Exchange. The global benchmark Brent went up 0.6 per cent or 26 cents per barrel to reach US$ 46.63 per barrel on ICE Futures Europe.
The United States Energy Information Administration said on Monday that production from numerous key shale oil fields is estimated to drop by 80,000 barrels per day by October. Eagle Ford shale based in Texas was one of the most prominent spots at the time of the drilling boom in the US and crude oil output from this location has been down for seven consecutive months. According to ClipperData’s analysis, the output from the Texas based spots has dropped 17 per cent since then.
The fact that Eagle Ford reported the sharpest decline was extremely surprising, according to Simmons and Co International.
Several speculators have been making large bets all through the year on the fact that oil prices will collapse and it will compel shale producers in the United States to reduce drilling activity. This in turn will result in reduced output and lower recovering prices as the market tries to rebalance itself. Currently, oil prices are down by approximately 60 per cent since the highs of 2014.
Senior oil derivatives trader at Global Risk Management based in Copenhagen, Michael Nielson said that the spike in oil prices is bound to happen unless something radical stops it. If the United States Federal Reserve decides not to hike the rate of interest, the recovery could possibly come this week.