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United States Crude Oil Stock Change

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Editor’s Remarks:
Yesterday evening it was announced that crude oil production in the United States had fallen by 1.88 million barrels, contrary to market expectations of an increase by 3m barrels. The stocks of crude dictate the market supply, and therefore, falling production reduces the global supply glut and represents a positive sign for the price of oil. Coupled with the following announcement that OPEC had reached an agreement for modest oil output cuts in production, for the first time since 2008, the price of oil subsequently rose 5% to $48 a barrel. It seems that the Saudis are finally realizing the pressure of the prolonged period of low oil prices. Commerzbank has cited slowing demand as the principal reason for a bearish factor in oil supply. However, oil refineries operating to within their lowest possible costs should also be recognised as a possible reason for the decline in stock. The industry may still see fewer refineries being built and possible closures across the United States in the coming months. With Saudi Arabia and the US as two thirds of the world’s largest global producers reducing oil production expect to see more stability in the price of oil in the coming months, as confidence slowly seeps back into the industry.

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