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Oil prices hit fresh high for 2016 | Oil prices hit fresh high for 2016 |
(35 minutes later) | |
Oil prices hit their highest levels of the year on Friday, driven up by lower US production and a weak dollar. | Oil prices hit their highest levels of the year on Friday, driven up by lower US production and a weak dollar. |
Both US and Brent crude prices hit 2016 peaks, trading as high as $46.27 and $48.30 a barrel respectively. | Both US and Brent crude prices hit 2016 peaks, trading as high as $46.27 and $48.30 a barrel respectively. |
US domestic crude production has continued to fall in recent months, easing concerns about oversupply. | US domestic crude production has continued to fall in recent months, easing concerns about oversupply. |
Meantime the dollar has lost almost 2% of its value against other global currencies over the past week. | Meantime the dollar has lost almost 2% of its value against other global currencies over the past week. |
A weaker US dollar typically contributes to a rise in oil prices, because oil is priced in dollars. When the dollar weakens against other currencies, oil becomes cheaper to buy, pushing up demand. | A weaker US dollar typically contributes to a rise in oil prices, because oil is priced in dollars. When the dollar weakens against other currencies, oil becomes cheaper to buy, pushing up demand. |
Global production | Global production |
However, the latest rise in oil prices may be limited by a future increase in Middle East production, according to a note released by Deutsche Bank. | However, the latest rise in oil prices may be limited by a future increase in Middle East production, according to a note released by Deutsche Bank. |
Iraq and the UAE are likely to raise production after maintenance issues are resolved, Deutsche indicated, and Saudi Arabia may also increase production significantly. | Iraq and the UAE are likely to raise production after maintenance issues are resolved, Deutsche indicated, and Saudi Arabia may also increase production significantly. |
"A sustainable rise in Opec production may be just around the corner, and... the rally may pause," Deutsche said. | "A sustainable rise in Opec production may be just around the corner, and... the rally may pause," Deutsche said. |
But this may be tempered by events in Latin America, where Venezuela is struggling to maintain its own crude output, according to a report from Eurasia Group. | But this may be tempered by events in Latin America, where Venezuela is struggling to maintain its own crude output, according to a report from Eurasia Group. |
The organisation reported that low oil prices over the past two years have meant Venezuela's government is running out of cash to keep its state-owned oil pumps operational. | The organisation reported that low oil prices over the past two years have meant Venezuela's government is running out of cash to keep its state-owned oil pumps operational. |
Price dynamics | Price dynamics |
The oil price has fallen dramatically over the past two years since Brent crude hit a peak of $115 a barrel in June 2014. | The oil price has fallen dramatically over the past two years since Brent crude hit a peak of $115 a barrel in June 2014. |
One factor behind the fall has been slowing demand from China and other developing economies. | One factor behind the fall has been slowing demand from China and other developing economies. |
Supplies have also increased, most notably from new sources of US shale oil. | Supplies have also increased, most notably from new sources of US shale oil. |
In addition, big producers such as Saudi Arabia have not reduced output to try to push up prices. | |
Earlier this month, a meeting of the world's leading oil exporters failed to agree a cap on production. | Earlier this month, a meeting of the world's leading oil exporters failed to agree a cap on production. |
Saudi Arabia appeared willing to freeze output only if all members of the Opec oil producers' cartel agreed, including Iran. | Saudi Arabia appeared willing to freeze output only if all members of the Opec oil producers' cartel agreed, including Iran. |
But Iran maintained it would continue the increase in oil production it has followed since economic sanctions were lifted earlier this year. | But Iran maintained it would continue the increase in oil production it has followed since economic sanctions were lifted earlier this year. |