Oil prices boosted by Chinese demand, but US rig count rises

Oil prices on track for weekly loss

Oil prices rose by over 1 per cent on Friday on solid Chinese demand and threats of a strike by workers in the Nigerian oil industry.

But, Reuters reports US oil prices were on track for weekly losses of up to 1.7 per cent on concerns that rising US production could weaken the impact of OPEC’s supply cut agreement.

By 2 p.m. EST, Brent crude was up $1.01 to $63.21 and US WTI rose by 56 cents to $57.25/barrel.  The Canadian Crude Index fell to $37.36.

Data from the Chinese government shows China’s crude imports rose to 9.01 million barrels per day (b/d), the second highest on record.

“We have good numbers out of China,” John Macaluso, an analyst at Tyche Capital Advisors told Reuters. “A lot of the extra imports are not from Saudi Arabia. Iran, Russia and the U.S. are some of the countries picking up the slack.”

China’s rising demand will make it the largest importer of crude in 2017. US investment bank Jeffries predicts global oil demand growth will be about 1.5 million b/d with an almost 10 per cent demand growth in China.

“Generally speaking, the market is looking more healthy than sick,” Tamas Varga, analyst with PVM Oil Associates told Reuters.

Varga added that threats of a strike by Nigerian oil workers later in the month also boosted oil prices.  The workers are protesting a mass firing of new union members.

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) is calling on the Nigerian government to force companies to rehire the fired union workers.

Despite the turmoil in Nigeria, the OPEC supply cut agreement continues to underpin the market.  The deal helped push oil prices higher between June and October.  Benchmark Brent rose by about 40 per cent during that time.

“Even if you have no bullish view … OPEC and Russia have taken away the risk to the downside,” Bjarne Schieldrop, chief commodities analyst with SEB Bank told Reuters.  Schieldrop added it was unlikely that Brent would drop below $61 per barrel.

A concern for analysts and investors remains rising US production.  EIA data showed US crude output had risen by 25,000 b/d to 9.7 million b/d in the week ending Dec. 1.  US output is now closing in on Russia’s and Saudi Arabia’s production levels.

Baker Hughes reports the US oil rig count rose by two last week and now sits at 751.  At this time last year, there were 371 oil rigs operational in the United States.  In Canada, the oil rig count is up by one to 112.  The oil rig count at this time last year in Canada was actually higher, at 117.