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Oil to rise by 20 percent
Published on 04.04.2017 19:49

The oil price has bounced back today, recovering from yesterday’s fall, after Libya announced an increase in production leaving analysts deeply divided on the future direction of the commodity.

Before today’s rise, oil prices have been hit over the last few weeks as more US drillers jump on board to take advantage of higher prices which has for the time being offset the pressure of production cuts from OPEC.

Some say that with the Trumps administration’s permission for the Keystone pipeline in the US to go ahead, coupled with plans to open up more federal lands for oil exploration, the price has not reached a bottom yet.

“US inventories posted an increase yet again last week. Inventories increased by 0.9 million barrels to touch a new record high of 534 million barrels. US inventories alone have increased ~55 million barrels so far this year. If market balancing indeed has to start, we need to see a sustained drawdown in oil stockpiles. Until then, it will be difficult for oil prices to break higher” noted Harshal Barot, Commodities Analyst at Motilal Oswal.

On the other side of the spectrum is UBS analyst Giovanni Staunovo who said that cuts from OPEC are slowly starting to work their way through the system and with further reductions planned, it only a matter of time before the price rises as much as 20 percent,

"We believe the implemented production cuts will trigger a material drawdown in OECD oil inventories and thus higher crude oil prices," he said.

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Andrew Masters

Analyst

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