At the start of trading on Monday, oil prices rose amid strong demand and political uncertainty in Syria.
Oil Prices Climb Following Strong Demand, Uncertainty over Syria
The international benchmark for oil prices, Brent crude features, climbed 23 cents or 0.42 percent to $55 from the last close on Friday.
Crude futures for US West Texas Intermediate climbed 25 cents or 0.49 percent to $52.49 a barrel.
According to ANZ bank, the market is becoming very balanced due to a strong demand for oil and uncertainty across the world.
Recently, India overtook Japan as the biggest oil importer in the world. This saw the oil demand in March increase by 4.9 percent from the same time last year, according to Trifecta energy consultant Sukrit Vijayakar.
However, for the overall region of Asia, a portion of the growth in India will be offset by a 1.5 percent yearly decline in demand for oil in Japan over the next five years.
An increase in oil drilling in the US for 12 consecutive weeks across 672 rigs, the highest number of rigs since August 2015 has prevented markets from surpassing the $56 per barrel recorded last week.
Following the news on the rig data, US bank Goldman Sachs said that US oil production would increase by 215,000 barrels per day in 2017 on a year on year basis after a production backlog was accounted for.
The climb in US production is contrary to the supply reductions pioneered by the Organization of the Petroleum Exporting Countries, OPEC, which is looking to boost prices by bringing supply down in the first six months of 2017.
According to a BMI Research, “A reduction in OPEC volumes and an increase in US output will result in deeper discounts for US crude and facilitate increased exports from the US to Asia in the coming months.”
It added that the US would still be a minor player in Asia in terms of overall volumes given that OPEC aggressively protects its share of the market.
Outside the US, other players are reaping the benefits of OPEC’s production cuts, which have made the markets tighter.
Oil exports from Brazil have increased 65 percent since the start of last year to over 1.46 million barrels per day, according to government data.
Estimates by Wood Mackenzie Consultancy show that oil exports from Brazil will manage close to 1 million barrels per day throughout the year, a dramatic increase from just 798,000 barrels per day last year.