By November 13, 2017 Read More →

Oil prices mixed as Middle East tensions support market

Oil prices

Oil prices were mixed as Monday on increased tensions in the Middle East that could impact supply were weighed against rising US production. PDC Energy photo.

Oil prices underpinned by OPEC cuts

Oil prices were mixed in trading on Monday as rising tensions in the Middle East underpinned values but concerns about increasing US production impacted gains.

By 1:27 p.m. EST, benchmark Brent had fallen 35 cents to $63.17/barrel, but remained close to two-year highs after rising about 14 per cent in November.  US WTI rose 5 cents to $56.79/barrel. The Canadian Crude Index was at $41.70.

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Tensions between Saudi Arabia and Iran have supported the market, but some analysts are concerned that Saudi production could rise further.

“The rise by Saudi Arabia to produce more than 10 million barrels per day would have registered more,” John Kilduff Partner at Again Capital told Reuters. “This is a new level of geopolitical risk,” he said. Additionally, the market has less supply overhang than it did a year ago, he said.

Questions have arisen about the stability of the kingdom after Saudi Crown Prince Mohammed bin Salman arrested a number of royals, investors and officials in what he is calling a crackdown on corruption.  Critics have called his actions a power grab.

This, along with concerns about the war in Yemen and mounting tensions between Saudi Arabia and Iran, are concerns for investors.

As well, it is unsure how much impact a strong earthquake that hit Iran and Iraq on Sunday will have on the oil industry in the two countries.

An explosion and fire at Bahrain’s main oil pipeline was caused by sabotage and officials have linked the attack to Iran, but Tehran has denied any role in the attack.

OPEC says its supply cut agreement between most cartel nations and some non-member countries, including Russia, has helped cut down the global crude glut.  That, combined with OPEC’s forecast of higher demand for its crude next year point to an even tighter market in 2018.

Timera Energy told Reuters that the level of crude inventories held by industrialized nations above the five-year average “has fallen by more than 50 per cent in 2017, with inventories currently at around 160 million barrels.”

“If current trends continue, inventories are likely to return to the five-year average at some stage in 2018,” it said.  Strong demand worldwide has helped reduce the glut.

On Friday, Baker Hughes data showed the US rig count had rise to 738, the biggest jump since June after the count had fallen in August, September and October.


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