Oil prices rise slightly
Oil prices rose slightly on burbling Middle East tensions, economic deterioration in Venezuela and a possible extension of the OPEC supply cut, but were held in check by rising US output.
By the end of the session, Brent crude had risen by 35 cents to $62.57/barrel and US WTI was up 41 cents to $56.83/barrel. The Canadian Crude Index fell to $40.20.
“Geopolitical tensions in the Middle East and a deteriorating macroeconomic picture in Venezuela will remain supportive of oil prices in the run-up to the November OPEC meeting,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics told Reuters.
“However, persistently high oil production in the United States will be the predominant bearish factor limiting gains in oil prices,” Kumar noted.
Analysts speaking with Reuters say they expect Brent to fluctuate in a narrow range, from $61 to $63, while the market awaits the outcome of OPEC’s meeting in Vienna on Nov. 30.
The cartel along with non-members who participated in the OPEC supply cut agreement, including Russia, will meet to discuss extending the agreement that has helped cut into the global crude glut.
The deal was set to expire in March 2018, but many believe it will be prolonged to the end of next year.
“The market is just waiting for confirmation that OPEC wants to move on with the extension,” Ole Hansen, senior manager at Saxo Bank told Reuters.
Recently, some Russian officials have doubted the wisdom of staying in the OPEC deal, leading traders to take a more cautious approach and weighing down oil prices.
Russian news agency TASS reported that oil producers in Russia have met with Alexander Novak, Russia’s Energy Minister, to discuss a six-month extension, instead of the nine-month extension President Vladimir Putin originally offered.
In Venezuela, the acting president of its US-based refiner Citgo and five of the company’s top executives have been arrested by authorities on corruption allegations, according to the chief prosecutor.
According to Reuters, more concerning to investors and analysts, however, is rising US production. With producers becoming more productive per well, US output is rising faster than implied by the rising rig count.
Last week there were 738 rigs operational, up from 316 in mid-2016.
“Westwood Global Energy forecasts an 18 per cent increase in active rigs in 2018,” Reuters reports the consultancy said.
Later on Tuesday, the American Petroleum Institute will release data on US crude inventories and on Wednesday morning, the US Energy Information Administration will release its oil stocks data.
Analysts participating in a Reuters poll forecast a decline in US weekly crude stocks by 2.2 million barrels.
