The Country Caller takes a look at why oil is rising
Oil and gas exploration & production companies have seen a detrimental performance over the last two years. Oil prices, which have historically traded at around $115 per barrel, slid to as low as $27 per barrel, making it extremely difficult for oil and gas companies to breakeven.
The energy sector was going through a panic mood, as companies began slashing capital and operational expenditures, laying off workers and cutting back on costs. The robust supply followed by weak demand due to meagre growth in Europe and China has been the primary reason for the free fall in crude oil prices.
Things, however, seem to be coming back on track now. The Organization of Petroleum Exporting Countries (OPEC), which plays a major role in controlling the world’s supply, is finally coming up with a policy of limiting output. The international energy agency (IEA) has indicated that supply from the OPEC is at a decline, while inventories at countries which are big consumers of oil are also falling.
According to the IEA, the output from the OPEC in December was around 33.09 million barrels per day, signifying a decline of 320,000 barrels. During trading today, prices of oil showed further positive movement as there were reports that the OPEC would initiate further cuts.
According to Reuters, the OPEC, along with Russia, is scheduled to meet in Vienna and work on a system to bring a reduction in output by 1.8 million barrels of oil per day. During trading the US benchmark for crude oil, West Texas Intermediate (WTI), was up 1.95% at $52.37. On the contrary, the global benchmark for crude oil, Brent Crude, was up 2.40% at $55.46 per barrel. The United States Oil Fund LP (ETF) (NYSEARCA:USO) similarly was up 1.97% at $11.39, while the United States Brent Oil Fund LP (NYSEARCA:BNO) was up 2.20% at $15.32.