Oil closed Tuesday up 2% to $51.97 per barrel and the United States Oil Fund (USO - Free Report) , an ETF that tracks West Texas Intermediate (WTI) crude oil price is up 1.86% at $10.38 per share after Saudi Arabia-lead OPEC urged other members to reach their promised reduction.
The Organization of the Petroleum Exporting Countries (OPEC) reduced its production in February as Saudi Arabia continued to shoulder most of the cuts. However, Saudi energy minister Khalid al-Falih spoke at the CERAWeek Conference last week in Houston, saying that they would not be able to continue compensating for the other cartel members who haven’t reach the promised cuts.
OPEC agreed in November to cut back on the supply of crude oil by 1.2 million barrels a day for the first half of 2017 to avoid an oversupply of crude oil globally.
Forbes reported prices of oil quickly jumped about 15% and remained in the range of $50-$55 per barrel until last week, when the oil price saw a decline. This was largely based on the fear that the oversupply situation might be back due to lack of effort from other OPEC members, as well as, record high oil production in the U.S.
U.S. crude oil production has fallen from 9.6 million barrels per day in April 2015 to 8.6 million barrels per day in September 2016; however, even prior to OPEC’s reduction agreement in November, U.S. production has begun to climb again. Last week, the U.S. Energy Information Administration reported the ninth-straight weekly increase in production with 8.2 million barrels last week, which brought the total inventory to 528.4 million barrels.
OPEC nations and non-OPEC nations like Russia will be meeting again in May to discuss if they want to maintain the cuts announced last November. In that case, U.S. production will continue to rise.
In other energy news, Reuters reported President Trump’s administration has been contacting U.S. energy companies about their views on the Paris Climate pact.
During his campaign, President Trump had vowed that the U.S. would leave the Paris Climate Agreement, claiming it is hurting the economy.
The U.S. agreed in 2015 with nearly 200 other countries that it would reduce carbon dioxide and other emissions from the burning of fossil fuels. The U.S. has committed to reducing its emissions by between 26% and 28% below 2005’s level by 2025.
Though it is not clear which companies the President’s administration has contacted, many major U.S. oil companies have stated their support of the climate change deal previously.
Both Exxon Mobil Corp.’s (XOM - Free Report) and ConocoPhillips (COP - Free Report) expressed their stance favoring the Paris agreement. Conoco’s CEO Ryan Lance said last week at CERAWeek Conference that remaining in the Paris agreement would create opportunities for its natural gas operations and its investment in carbon-capture and storage.
"With a number of well-developed carbon capture and storage projects, the United States is already a global leader in cleaner coal technology,” said Benjamin Sporton, the president of the World Coal Association. “Given the role given to low emissions coal technology in the Paris Agreement by many developing economies, there are clear benefits to remaining within the agreement."
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