Oil hits $40, raises govt hopes

• Posted on March 11, 2016
• by Nana Kwesi Coomson
• Comment

Government could profit from oil rebound by the third quarter of this year following the commodity price hitting over $40 as at Tuesday March 7, 2016.

Ghana Government’s budget has been battered severely by low oil prices from mid last year till date. But the anticipated rebound of oil prices could bring smiles back to the government though consumers may pay more for petroleum products.

Brent crude rose on Monday, hitting a 2016 peak above $40 a barrel as investors rotated more assets into raw materials, with oil buying encouraged by talk that OPEC producers want a higher anchor price after a sell off that has lasted nearly two years.

Oil prices also got a boost from data showing a smaller-than-expected build in stockpiles at the Cushing, Oklahoma delivery hub for U.S. crude futures. But some analysts cautioned that the global crude glut remained big.

Global crude prices have risen more than 40 per cent since hitting 12-year lows less than two months ago. The rebound from lows of around $26 a barrel has also been driven by chart-related buying and asset rotation by investors that resulted in higher allocations into commodities such as oil and metals, as well as equities.

Analysts are also projecting that oil prices could hit $50 by the end of the year.

Bloomberg reported that oil prices could jump by more than 15 percent before the end of 2016.

It says analysts’ project that New York crude will reach $46 a barrel during the fourth quarter, while Brent in London will trade at $48 in the same period, the median of 17 estimates revealed.

Major OPEC producers are privately starting to talk about a new oil price equilibrium of $50 a barrel, adding to signs that the market’s long, deep rout is officially over.

By Augustine Amoah