Looking at a chart of crude oil futures, you could be forgiven for thinking 2016 did not end with OPEC agreeing to a cut in production.
And although price over the previous week was buoyant above $52.00, since Monday it seemed as though price could easily peak back below the $50.00 level.
The early decline in the week was a direct result of the continued rig count growth in the US, threatening to create another over supply situation.
As was expected by some, OPECs decision to cut output to 32.5 million barrels a day pushed up the price of oil, but at the same time has now made production a viable option for competitors that were previously priced out when oil was below $50.00
However despite this, and despite a rise in US crude oils stocks of 4.097 million barrels as the above chart shows. This figure was higher than the expected build of 1.162 million barrels, and should have triggered a another bearish move for the black stuff. However crude oil futures rose from an intra-day low of $50.74 to $52.77.
The reason for this being two fold, firstly There was news that Saudi Arabia will reduce February crude sales to China and southern Asia countries as it slows supply in accord with the November output cut.
Secondly, although the stock rise of 4.097 million barrels at first appeared bearish, there has been an increase in the amount of crude oil being used by refineries across the US. Bloomberg reports some 17.1 millions barrels being used each day last week – all ahead of planned seasonal maintenance.
This is all good news for oil bulls, as where it seemed prices may struggle above $50.00, they now seem well supported by a number of fundamental factors, for the time being at least. It will be important to maintain a view on supply levels in particular from the non OPEC countries in the coming weeks as producers get used to the higher cost of oil.