Oil prices have edged up on Tuesday, motivated by the expectation than an OPEC-led pledge to cut production would be extended beyond the first half of the year (2017) and into 2018, although overall supply still weighed on markets.
Take Brent crude futures for example, the international benchmark for oil prices were at $49.60 per barrel at 0045 GMT on Tuesday, which is up to 0.5% or 26 cents from their last close. United States West Texas Intermediate crude oil features on the other hand, were trading at $46.66 per barrel, up to 23 cents or 0.5% from the day before.
The price hike is a result of OPEC’s top exporter and de factor leader: Saudi Arabia, who game a remarkable statement on Monday that it would do whatever it takes to rebalance a market that has been dogged by oversupply for over 2 years, resulting in crude prices below $50 per barrel. In accordance to Saudi Arabia’s promise to rebalance the market would be to extend, potentially into 2018, a pledge by the OPEC and other countries including Russia to cut output by almost 1.8 million barrels per day during the first half of the year.
OPEC’s efforts to tighten the market and prop up prices have been undermined by a relentless rise in United States production, especially from shale oil drillers. This is related to the U.S. crude production has risen by over 10% since mid-2016 to 9.3 million barrel per day, close to the output of top producers Russia and Saudi Arabia.