Prices of brent crude hit $57.78 a barrel

EIA projects further rise in oil prices

Brent, which is the global benchmark for crude oil prices, moved from $47 per barrel to $57.78 yesterday.

Brent had on Tuesday, went up by $2.67, or 5.4 percent, at $51.92, breaking out of the $47 to $50 band it had held since early September.

Also, the price of Organisation of Petroleum Exporting Countries (OPEC) basket of 12 crudes stood at $46.08 d a barrel on Tuesday, compared with $44.95 the previous day.

This has been attributed to low U.S. production and increasing willingness among the major oil producers to collectively jump-start the market amid the prolonged price slump.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November CLX5, +1.71 per cent jumped by 94 cents, or 1.9 per cent, to $49.47 a barrel, after briefly trading as high as $49.71. November Brent crude LCOX5, +1.69 per cent on London’s ICE Futures exchange rose 71 cents, or 1.4 per cent, to $53.16 a barrel.

Meanwhile, the United Energy Information Administration (EIA) has projected that the Brent crude oil price will average $54 per barrel in 2015 and $59 per barrel in 2016, unchanged from September’s forecast.

EIA, in its October Short Term Energy Outlook released yesterday, said that crude oil price forecast remains subject to significant uncertainties as the oil market moves toward balance. “During this period of price discovery, oil prices could continue to experience periods of heightened volatility.

The oil market faces many uncertainties heading into 2016, including the pace and volume at which Iranian oil reenters the market, the strength of oil consumption growth, and the responsiveness of non-OPEC production to low oil prices. In the more immediate future, there is potential downward price pressure heading into the fourth quarter of 2015 if refinery runs drop by more than expected during the fall maintenance season”, it added.

According to EIA, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook. WTI futures contracts for January 2016 delivery, traded during the five-day period ending October 1, averaged $46 per cent, while implied volatility averaged 43 per cent.

It stated: “These levels established the lower and upper limits of the 95 per cent confidence interval for the market’s expectations of monthly average WTI prices in January 2016 at $32 per barrel and $67 per barrel, respectively.
“The 95 per cent confidence interval for market expectations widens over time, with lower and upper limits of $26 per barrel and $98 per barrel for prices in December 2016. Last year at this time, WTI for January 2015 delivery averaged $91 per cent, and implied volatility averaged 19 per cent. The corresponding lower and upper limits of the 95 per cent confidence interval were $76 per barrel and $107 per barrel”.