By November 2, 2017 Read More →

Oil prices steady on tightening market

Oil prices

Despite increased US production, oil prices stayed steady on Thursday. Linn Energy photo.

Oil prices on falling US crude stocks, higher demand

Oil prices remained near two-year highs on an upbeat market outlook thanks to the OPEC supply cut pact, tighter demand and falling crude inventories.

By 2:25, Brent was up 9 cents to $60.58/barrel after reaching a high of $61.70 on Wednesday, its highest intraday level since July 2015.  US WTI rose by 12 cents to $54.42/barrel.  The Canadian Crude Index was up 46 cents to $39.98/barrel.

The market has been buoyed in recent weeks by the OPEC supply cut agreement that has seen a reduction of crude output by pact participants of about 1.8 million barrels per day (b/d).

So far, compliance with the pact has been “excellent”, according to Saudi Arabia’s Energy Minister Khalid al-Falih.

Falih added that the oil market was balancing and oil inventories were dropping.

“Compliance as a whole for OPEC [ended] up being rather strong,” Mark Watkins, regional investment manager at U.S. Bank told Reuters. “Now that we’ve flipped the calendar to November we have the OPEC meeting at the end of the month. There’s expectation that there will be positive comments about extending the cuts past March.”

The pact is set to expire in March 2018, but Russia and Saudi Arabia have voiced support for extending the agreement to the end of 2018.

Reuters reports Iraq’s oil minister says his country supports continuing the agreement, adding that oil at $60/barrel would be an acceptable target for his country.

The US Energy Information Administration reported on Wednesday that US crude inventories had fallen by 2.4 million barrels last week.  The drop comes despite an increase in US production by 46,000 b/d to 9.55 million b/d.

Goldman Sachs predicts US oil production to grow by 0.8 to 0.9 million b/d, bringing it to 9.6-9.7 million b/d by the end of 2017.

US crude exports are also on the rise, mostly due to a wide discount to Brent prices.

On Friday, Baker Hughes will release its weekly rig count data.

US Bank’s Mark Watkins told Reuters “If rig counts didn’t increase with oil prices being at a higher level then we may be seeing a high water mark in the U.S. shale production at this time.”

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Posted in: Energy Financial

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