Last week was marked by volatility in crude oil prices. WTI began the week at USD 43.03/barrel, rising as high as USD 46.51/barrel on Friday and ending the week at USD 44.48/barrel. This volatility was due to several factors, including:
- Saudi Arabia said that it would reduce oil production (currently at 10.7 million barrels/day) in exchange for a commitment from Iran to freeze its output at current levels. Although the proposal did not lead to an agreement, the market will be paying close attention as OPEC meets with Russia on September 27th. If the meeting can lead to an agreement, oil prices could rise.
- Iranian oil production has risen significantly since the beginning of the year. Iran’s output in August was 3.62 million barrels/day, up 820,000 barrels since the beginning of the year. The country has a production capacity of 4 million barrels/day.
- Nigeria announced plans to resume exports of two types of oil: Qua Iboe and Forcados. Exports of these products have been limited for months due to rebel attacks. Emmanuel Ibe Kachikwu, the Nigerian Minister of Petroleum Resources, said that production should ramp up over the next few weeks following the negotiation of a ceasefire with rebel forces.
- Figures released on Wednesday by the U.S. Department of Energy indicated a 6.2-million-barrel drop in crude oil inventories. This news helped drive up oil prices.
Given the current volatility in the markets, we are encouraging our clients to leave orders with us to implement hedges on fuel in CAD/litre. Have a good week!
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