By November 3, 2017 Read More →

Oil prices up on increased demand, OPEC deal extension expectations

Oil prices

Oil prices rose on Friday on higher demand globally and expectations that the OPEC supply cut pact will be extended. Nabors photo.

Oil prices up over 30 per cent since June

Oil prices nearly hit levels not seen in over two years on Friday on increased demand and expectations that participants in the OPEC supply cut agreement will agree to extend the deal.

By 12:46 p.m. EDT, benchmark Brent had risen by 66 cents to $61.28/barrel and US WTI rose 46 cents to $55.  The Canadian Crude Index rose 57 cents to $40.09/barrel.

Since June, Brent has jumped about 38 per cent and WTI is up by 30 per cent.

“The market continues to find support from expectations that we’re going to see the cut extended and from robust demand,” Gene McGillian, director of market research at Tradition Energy told Reuters.

On Nov. 30, OPEC members will meet to discuss extending the cartel’s supply cut pact which is currently set to run out at the end of March 2018.

Reuters reported that on Thursday, Russia said the deal could be prolonged, but a decision on the possible extension is not imminent.

At about 9 million barrels per day of imports, China has now surpassed the US at the top importer of crude globally.

McGillian says this increasing demand in other areas shows “There’s an idea that the global economy is looking pretty good”

Investment bank Jefferies said “China’s oil demand growth appears to be accelerating.”

Physical oil prices are also on the rise.  Reuters reports Saudi Aramco, ADNOC and Qatar Petroleum have all raised their crude prices for Asian buyers.  Aramco’s December premium over the average of the Oman and Dubai benchmarks now sit at their highest in three years.

As well, traders are watching the turmoil in Venezuela and at the country’s state oil firm, PDVSA.  The government and PDVSA owe about $1.6 billion in debt service and delayed interest payments by the end of 2017, and another $9 billion in bond servicing in 2018.

On Oct. 12, PDVSA missed an $81 million bond payment, but was granted a delay under a 30-day grace period.  Investors say failing to pay on that on time, could trigger a default.

On Friday, Baker Hughes released its rig count data showing the US oil rig count was down in the week ending Nov. 3 by eight to 729.  In Canada, the oil rig count is up by four to 100.

This time last year, there were 450 oil rigs in the United States and in Canada, there were 76 oil rigs operational.


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