Oil prices steady as US production down, drilling slows
On Monday, oil prices rose slightly as investors hopes were boosted on news of possible US sanctions against Venezuela as well as a meeting next week where some OPEC supply cut participants will meet to discuss improving compliance with the deal.
Investors are also keeping a watchful eye on the tightening US market that saw a larger-than-anticipated decrease in crude stocks and slower new oil rig additions last week.
Brent crude settled up at $52.65 and US light crude ended the day at $50.17/barrel.
After trading closed, the US Treasury Department announced it was imposing sanctions limited only to President Nicolas Maduro.
“As far as the oil market is concerned that’s a non-event,” James Williams, president of energy consultant WTRG Economics told Reuters. “It’s just eye candy as far as I can see.”
US data showed hedge funds and money managers raised bullish bets on US crude to reach their highest level in three months.
“Sentiment in the oil market became very bullish after OPEC said it will meet with partners in Abu Dhabi next week to discuss compliance,” Frank Schallenberger, head of commodity research at LBBW, told Reuters.
On Aug.7-8, some OPEC and non-OPEC members will meet in Abu Dhabi to discuss how the cartel can improve compliance with the supply cut agreement.
In the Netherlands, a fire at Shell’s 404,000 barrel per day (b/d) Pernis refinery resulted in European diesel margins hitting their highest mark since November, 2015 at $14.60/barrel.
US crude inventories are down by 10 per cent from their March highs to 483.4 million barrels and US production fell by 0.2 per cent to 9.41 million b/d in the week to July 21. US drilling is beginning to slow as just 10 rigs were added in July, the fewest since May 2016.
Despite the optimism, oil analysts have cut their 2017 crude price forecasts for a sixth straight month in July. They remain concerned that faltering compliance with the OPEC deal could impede the market’s rebalance.
According to a Reuters survey, 33 analysts and economists expect Brent crude to average $52.45/barrel in 2017, below the $53.96/barrel forecast in June. So far, Brent has averaged $52.12 in 2017.
US light crude is expected to average $50.08/barrel, down from the June estimate of $51.92/barrel.
As well, analysts have lowered their price outlook for 2018 with Brent seen averaging $54.51/barrel and WTI at $51.88/barrel.