Weak Dollar and US production cut brings crude closer to $50

Crude price has recorded its biggest price gain in seven years one week after the US President Obama’s visit to Saudi Arabia. The surprisingly strong recovery of crude is attributed to a major supply cut made by the US which is a non-OPEC producer.

Market analysts found that the existing supply glut trend has eased with slowed production by the US. So far, crude price was ruled by increasing tussle between the non OPEC new boy – the US which was helped by the shale revolution and the OPEC.

The Brent crude price has closed at $48 on Friday. Besides the declining US production, declining dollar also added to the price gain.

Market is yet to find a balance between demand and supply which will enable the commodity to settle near $50; the price many sees as a medium term equilibrium. But the US production cut is a right signal that the rivalry between OPEC and non-OPEC countries including the US and Russia is settling.

Despite the US production cut analysts see, the OPEC itself in not in consensus to cut production and this may put downward pressure on the price in near future. “Scheduled restart in United Arab Emirates and Nigerian production, combined with a continued Iranian ramp-up, could result in OPEC production exceeding our third-quarter 2016 assumption,” the Financial time quoted an analyst at Deutsche Bank.



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