Oil futures rose yesterday, reversing the declining trend after Goldman Sachs and Morgan Stanley increased their forecast for oil prices on account of reduced OPEC spare capacity. WTI futures rose by 0.57 percent to USD $ 98.26 a barrel. Brent futures rose by 0.63 percent to USD $ 110.79 a barrel.
Ever since fighting erupted in Libya, oil production has been severely disrupted from the country. Libyan exports fell by 79 percent in March. There is a growing idea that OPEC will have to make use of its spare production capacity in order to increase oil output to meet the shortage in oil supply when the summer season reaches its peak. A decrease in spare production capacity leads to an increase in oil futures, since there is a slight risk premium of oil supplies getting affected if any unforeseen events hit the market and affects oil production. Concerns about OPEC using up its spare capacity have also overtaken fears about Europe’s growing debt problem.