Oil price jumps as Opec’s strategy undercuts rivals’ supply
Oil prices rose after the Organisation for Petroleum Exporting Countries (Opec) said demand for its crude oil will rise this year as rivals' supplies suffer, reinforcing the group's decision not to cut production in November.
Its monthly oil market report said demand for the group's crude oil will jump by around 100,000 barrels a day to 29.2m this year. But it slashed predictions for non-member oil producing countries by 420,000 barrels per day to 860,000.
Brent crude, the international benchmark, added to recent gains rising 0.7 per cent to $58.19 a barrel after the report.
Opec said rivals will lose out amid "announced capital expenditures cuts for 2015… as well as a decline in the number of active drilling rigs in the US and Canada, geopolitics and a heavy annual decline in Russian brownfields".
The move reinforces Opec's decision not to cut output in November, despite calls from smaller member states such as Venezuela, part of its strategy to let reduced oil prices strangle the emerging US shale gas industry.
The number of rigs drilling for oil in the US fell by 83 last week to 1,140 – the lowest figure since December 2011 – according to data released by oil services firm Baker Hughes.
In the last few months oil companies, both big and small, have scaled back expensive oil drilling projects as they scramble to cut costs amid tumbling oil prices.
Oil prices have shed around 50 per cent since June last year amid a global supply glut and waning demand for emerging economies such as China and India.