By September 22, 2017 Read More →

OPEC defers deal extension decision, oil prices up

Oil prices

Oil prices hovered around Thursday’s levels. On Friday morning, Baker Hughes reported another drop in the US rig count last week. ConocoPhillips photo.

Oil prices remain close to highest levels in months

In trading on Friday, oil prices were mixed but remained close to their highest levels in months after OPEC announced participants in its supply cut pact may wait until January to decide if they will extend the deal beyond March.

Benchmark Brent closed up 43 cents to $56.86/barrel and US WTI climbed 11 cents, ending the session at $50.66/barrel, a few cents short of its May peak price.

For the week, Brent posted a gain of 2.2 per cent, and WTI rose 1.5 per cent.

energy eastIn the past three months, oil prices have jumped by more than 15 per cent.  Rising global demand and the OPEC output deal that cut 1.8 million barrels per day has helped reduce the stubborn oil glut that had significantly impacted oil prices.

According to Reuters, Alexander Novak, Russia’s Energy Minister said “I believe that January is the earliest date when we can actually, credibly speak about the state of the market.”

Some of his counterparts from other oil producing nations argued that they could make such a decision before the end of 2017.

“It wasn’t a strong surprise to see that they deferred that decision,” Tony Headrick, energy market analyst at CHS Hedging LLC told Reuters. “Regardless of the OPEC meeting’s outcome, signs are that the market is moving toward balance.”

Headrick said strong demand for distillates, especially European gas oil show the market rebalancing.  He said this “is supporting Brent and in turn is supporting U.S. products and WTI as well.”

Chair of the OPEC meeting, Kuwait’s Oil Minister Essam al-Marzouq agreed, saying the market “is evidently well on its way towards rebalancing.”

The United States Energy Information Administration reported this week that crude production in the US rose to 9.51 million b/d last week.  This rising US output has somewhat offset the OPEC cuts.

Hurricanes in the Gulf of Mexico have resulted in increased US crude stocks as some refineries along the Gulf Coast shuttered by Hurricane Harvey struggle to restart operations.

On Friday, Baker Hughes’ rig count reported a drop in oil rigs in the US by five to 744, but the number of gas rigs rose by four to 190.  In Canada, the oil rig count was up by 10 to 122 and the number of gas rigs fell two to 98.

This time last year there was a total of 511 rigs operational in the US and 138 rigs in Canada.

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