Brent prices hit $60 recently and have maintained the levels since. Analysts and writers assume the new $60 price for Brent benchmark could easily become the floor price for Brent. The next OPEC meeting to be held in Vienna is to be held on November 30th, with investors already echoing the $70 level as the fair price for the benchmark.
The key question in upholding the prices will be the discipline by member states to comply with the said cuts given the rising prices and temptation to cheat (more than they do now!). Saudi Arabia needs oil prices at $70 per barrel in 2018 for a budget breakeven, the International Monetary Fund (IMF) estimated last week, while Russia claims that it “can live forever” at $40 oil.
Brent futures, the international benchmark for oil prices, were at $63.74 per barrel at 0121 GMT, up 5 cents from their last close and not far off the near two-and-a-half year high of $64.65 a barrel reached earlier this week.
U.S. West Texas Intermediate (WTI) crude was at $57.08 per barrel, down 12 cents, or 0.2 percent, from their last settlement, but also still not far off the $57.69 a barrel reached earlier this week, the highest since July 2015.
The Brent – WTI spread has recently widened during the last two years. In the past, that usually happens because US East Coast refineries purchase a lot more domestic crude, shipping the commodity via despite it being the costliest. The recent widening of the Brent-WTI differential, however, is not large enough to justify a large-scale shift from foreign to domestic buying.
Conclusively, oil prices are at their multi year highs as a confluence of events have accelerated the rebalancing process adding to the bullish momentum. Despite the confluence being majorly due to the geo-political situation in Iraq and Saudi Arabian purge within the country; for prices to sustain in near future, OPEC and others need to bring down the supply to a level where the real demand can increase the oil prices rather than the geo-politic factors.