The Country Caller takes a look at why USO and BNO might fall again
Published By: Eunice Gettys on January 11, 2017 10:52 am EST
Crude oil prices lately have stayed above the $50 per barrel mark and have sparked a glimmer of hope among the major oil and gas producing countries. However, the question that everyone is asking is that whether oil would continue to rise further or disappoint investors by falling once again.
In recent times, the shale boom in the US has created an abundant crude oil supply by weighing in on prices. But the even bigger factor that has impacted crude oil prices is the Organization of Petroleum Exporting Countries (OPEC). While the OPEC managed to architect a deal to cut production, there is some skepticism over the production cut.
The United States Oil Fund LP (ETF) (NYSEARCA:USO) closed down 2.12% at $11.07 on Tuesday, while the United States Brent Oil Fund LP (NYSEARCA:BNO) closed down 2.18% at $14.82. Despite OPEC members calling for a production cut, some members are continuing to pump more oil.
As reported by The Wall Street Journal, Libya, which has an exemption from the production cut, has managed to triple its output in the last six months. The country was recently faced with a civil war and unrest. Hence, it was exempted from the production cut. The violence that had prevailed in the country had prevented it from producing at its maximum output. However, with the problems being averted to some extent, the country has signed deals with numerous companies in order to help it boost its output.
Some other countries such as Iran and Iraq have also managed to raise exports. Iran was hit by Western sanctions and now aims to bring its production back to pre-sanction levels. Some analysts, as reported by the WSJ, have also expressed bearish sentiments on oil. Tariq Zahir regarding the issue said that “It’s just incredible how much” production is still coming, He added that “All of these cuts could be negated just by Libyan production.”