Oil prices down after Putin clarifies oil market remarks
Oil prices dropped about 3 per cent on Friday after investors cashed in on oil’s recent rally and remarks made by Russian President Vladimir Putin earlier in the week on extending the OPEC supply cut pact were clarified.
Benchmark Brent was down $1.27 to $55.73/barrel by 1:21 p.m. EDT. US WTI dropped by $1.41 to $49.38/barrel and is set to close the week down by more than 4 per cent, the biggest weekly loss in four months. Western Canadian Select prices rose by 90 cents to $39.92/barrel.
“Yesterday we had Russia and the Saudis talking about extending cooperation, and today we saw a little bit of backtracking with respect to additional cuts in production.” Houston-based consultant Andrew Lipow told Reuters. “What the market gained yesterday is clearly being given back today.”
Reuters reports that on Friday, Russia clarified Putin’s remarks on a possible extension of the OPEC supply cut pact he had made earlier in the week. Officials said Putin did not propose an extension of the agreement to the end of 2018, but they say he saw it as a possibility.
Concerns about increased US crude exports due to a widening Brent-WTI discount are also impacting oil prices.
“We have a couple of bearish factors like a new record for U.S. crude exports, the reopening of Libya’s biggest oilfield, a new year high in U.S. crude production and the recent strength of the U.S. dollar,” Frank Schallenberger, head of commodity research at LBBW told Reuters.
The strengthening US dollar has made crude more expensive for buyers using other currencies, weakened oil prices on Friday. The US dollar hit a 10-week high after data showed the largest gain in US wages since December 2016, bolstering bets on an interest rate increase by the end of the year.
“I expect Brent to drop below $55 a barrel and WTI below $50 in the next couple of days,” Schallenberger said.
On Friday, Baker Hughes released its weekly rig count. Last week, the US oil rig count dropped by two to 748 and the number of gas rigs was also down by two, landing at 187. The total number of rigs is up 412 rigs from last year’s count of 524 at sits at 936 currently.
In Canada, the rig count also dropped with one less oil rig, making the count 112 and three fewer gas rigs dropped the count to 97. In total, there are 209 rigs operational, up from 165 at this time last year.
Tropical Storm Nate
Tropical Storm Nate is forcing some companies to shut down production in the Gulf of Mexico ahead of its expected arrival on Sunday. By then, forecasters predict the storm to be upgraded to a hurricane.
“The biggest impact (from Nate) could be on gasoline prices, depending on how many refineries are forced to shut down. But I don’t think we will see another bull run,” Schallenberger told Reuters.
According to a Reuters report, BP and Chevron have shut down production on all platforms in the Gulf of Mexico and Shell along with Anadarko have both suspended some activity. Exxon, Statoil and other producers have evacuated some of its personnel.
Hurricane Nate is expected to cut through the heart of Gulf oil production, according to Lipow.
