By Nigar Abbasova
Oil prices rose on February 6, as traders have focused on weakening dollar, and on concerns that new U.S. sanctions against Iran could affect crude supplies.
Brent crude futures were trading at $56.96 per barrel, recording an increase of 15 cents from their last close, while U.S. West Texas Intermediate (WTI) contracts were 18 cents up to stand at $54.01 per barrel, Reuters reported.
The price of OPEC basket of thirteen crudes stood at $54.24 a barrel compared to $53.93 the previous day, according to OPEC Secretariat calculations.
The greenback has lost almost 4 percent against a basket of other currencies since early January. The bad start in 2017 for the dollar put a big question mark on what to expect, while further declines in value are not out of the question. The tendency spells good news for investors making greenback-denominated commodities cheaper for importers holding other currencies.
Tensions between Tehran and Washington are also supporting oil as a recent Iranian ballistic missile test prompted U.S. President Donald Trump to impose sanctions on Iranian entities. The move came shortly after the administration said that they were “putting Iran on notice”. The sudden resurgence in tensions could push up prices as deterioration of the ties raises a risk of disrupting supplies.
Iran, which has succeeded in propping up its oil output after international sanctions were lifted a year ago, may face certain obstacles while attracting investment in its petroleum industry The country reportedly needs investment worth $200 billion, while some $130 billion would go to the upstream sector.
The Islamic Republic currently produces around 3.7 million bpd, while its aim is to reach a daily volume of 4 million barrels by March 20, 2017. Regardless a limit of 3.79 million bpd set by OPEC, head of the National Iranian Oil Company (NIOC) Ali Kardor earlier said that the country intends to increase its production up to 4 million.
Evidences that the Cartel and other major producers are more or less complying with the production cuts is still main catalyst for the prices.
The group is expected to publish its official assessment of compliance on February 13, basing on its assessment of production, plus a summary of the official government statements of their respective output levels.
Meanwhile, the U.S. JP Morgan bank expects the compliance of the OPEC oil output deal to reach 75 percent in January .
“Oil markets remain tightly bound in the price range that has existed since early December. Although consensus expectations seem to have coalesced around OPEC having made a strong start to its pledge to reduce production, and that output is close to 32.3 million barrels per day, risks remain that some of the members have not yet implemented the agreement as quickly as others,” reads the Oil Market Weekly report of the Bank.
However, signs of growing U.S. output and worries that demand in China could slow drag the market back.
U.S. drilling activity rose last week, adding some 17 additional oil rigs and bringing the total number up to 583, a record-high level since October 2015, according to Baker Hughes.
Besides, Chinese refining capacity is projected to decrease by some 6 percent (equivalent to around 900,000 bpd of capacity) during the first half of the year, according to BMI.
Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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