Despite relatively high US crude oil production, curtailments in production by members of the Organization of the Petroleum Exporting Countries (OPEC) and robust global demand supported crude oil price increases in 2017.
This, coupled with rise in prices of crude at the global market, signified bullish trade for Nigeria, Africa's biggest crude exporter, which depends largely on proceeds from crude oil to service over 85 per cent of its budget.
Just as the OPEC cuts started to have a tangible effect on global oil inventories, the geopolitical risk premium returned to the oil market past year, first with the fallout from Kurdistan's referendum and Iraq's response to it, which pushed oil prices up on concerns over supply outages from the region.
Brent crude ended the session up $1.04, or 1.5 percent, at $68.82 per barrel after hitting a session high of $69.08, its highest since May 2015.
Weekly April Brent Crude Oil
Brent, the global benchmark for oil prices, was last up 6 cents at $69.26 a barrel.
Brent crude doubled in the past one year and touched Dollars 70 a barrel mark yesterday, the highest since December 2014.
"The extension of the OPEC agreement and declining inventories are all helping to drive the price higher", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.
The rising oil price comes as the extended OPEC and Russian Federation oil output cap remains firmly in place until the end of 2018. American inventories fell by 4.95 million barrels last week, the eighth consecutive drop, while stockpiles at Cushing, Oklahoma, the delivery point for West Texas Intermediate, extended a decline below the five-year average. Iran's oil minister said this week that OPEC is not interested in an oil price above US$60. "In general, by May, we can expect oil prices to rise gradually to $75 per barrel, if the trend continues and there will be no shocks", Igor Yushkov predicts. Oil prices are up around 5% already in 2018.
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He also pointed to recent data from the American Petroleum Institute that showed United States crude inventories fell by 11.2 million barrels in the week to January 5 to 416.6 million barrels.
EIA research shows that USA gasoline prices tend to follow the price of the best grades of oil in Europe, more than they follow the price of the best US crude.
Commerzbank noted that China imported 7.95M barrels of crude oil per day in December - 12% less than in November, which was a very strong month. "Weaker USD tends to support prices".
"We estimate that WPI could rise by 0.5-0.7 per cent on account of a 10 per cent increase in crude price, while the impact on retail inflation would be less pronounced given the lower weight of oil related products and can be in the region of 0.3-0.35 per cent", it said.
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The expectation has been that U.S. producers would fill the void - encouraged by the price boost - providing some balance to the market.
Net U.S. crude imports USOICI=ECI rose last week by 152,000 bpd.
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