Commodity Update; Crude Oil – 26 September 2014
Crude benchmarks stabilise on middle east conflict, OPEC seen maintaining current production for the remainder of 2014
Crude oil benchmarks stabilised this week following the announcement by US President Barack Obama that allied forces would be conducting air-strikes on targets in Syria, an area that was previously off limits due to threats from the Syrian regime.
In addition to the increasing tempo of attacks on insurgent positions in the middle east, better than expected GDP data from the US on Friday also appeared to add support to the case for stabilising prices.
Despite this, reports released by consulting firm Oil Movement during the week appeared to contradict expectations for lower OPEC output during the months ahead.
This was as the group announced that overall production during the recent four weeks had actually increased by 360,000 barrels per day, bringing total output largely into line with that seen before earlier reductions were made in August.
All in all, it remains unclear whether or not prices will rise further by any notable degree during the coming weeks however, better economic data and the spread of allied attacks on insurgents in the middle east have helped to establish a firm floor for both benchmarks close to last week’s lows.
Looking ahead, we expect production increases in North America and Libya, weighed against the economic outlook for developed nations and the potential for increased action in the middle east, to result in a net neutral effect for prices.
In short, while we do not see scope for rapid price acceleration we do view the likely downside from current levels as being limited.
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