By October 17, 2017 Read More →

Oil prices steady, despite increasing US production

Oil prices

Oil prices steadied throughout the day despite concerns over rising US production and exports. New York Times photo by Jim Wilson.

Bank of America Merrill Lynch said it was raising its forecast for oil prices

Oil prices fell early in the day on concerns over US crude production and exports, but by the end of the session, prices had settled up slightly.

After rising early in the session by nearly 1 per cent, Benchmark Brent landed at $57.88/barrel, up 6 cents and US WTI finished the day up 1 cent to $51.88/barrel.   Western Canadian Select was up 51 cents to $40.40/barrel.

On Tuesday, Iraq forces recaptured Kurdish territory across northern Iraq, including the last two oilfields held by Kurdish fighters known as the Peshmerga.  The oilfields were located near the city of Kirkuk.

The fighting in the oil-rich area has restored a risk premium on oil prices, even though reports show normal operations throughout the region.

“The security premium built into prices from the (Iraqi-Kurdish) situation is in the process of vanishing,” John Kilduff, partner at Again Capital LLC told Reuters.

“Everyone is looking to see if the high level of (U.S.) crude oil exports will pull down inventories again,” Kilduff added.

Along with tensions in Iraq, friction between the Trump administration and Iran is also boosting the global risk premium for crude.

On Friday, President Trump refused to certify that Iran had complied with the nuclear deal.  Congress now has 60 days to decide on further action against Tehran.

Previous sanctions against Iran had cut out about 1 million barrels per day (b/d) of crude from markets.

In Syria, US-backed militias declared victory over Islamic State in the capital of Raqqa, the last jihadist foothold, on Tuesday.

“Oil and geopolitics are very much interlinked,” Fatih Birol, executive director of the International Energy Agency, told Reuters. “Oil security remains a critical issue.”

On Tuesday afternoon, the American Petroleum Institute will release its weekly oil inventory data and the US Energy Information Administration will release its data report on Wednesday morning.

Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Bas Analytics told Reuters “Market participants will closely watch the rising oil-production profile in the United States and persistently high exports from the country – factors that will continue to limit gains in oil prices.”

Reuters reports that Bank of America Merrill Lynch has increased its oil price forecasts.

“We see Brent averaging $54 this quarter and $52.50 per barrel in 1H18, compared with our previous forecasts of $50 and $49.50 per barrel respectively,” it said.

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