Global benchmark oil futures pause, ending 4-week gains

Marco Green
January 22, 2018

In November, it was reported that OPEC production fell for a fourth straight month.

The main bearish factors included the slow but continuous rise of USA domestic crude oil production and potential stronger contributions by other non-Opec producers such as Canada and Brazil.

"We shouldn't limit our efforts to 2018 - we need to be talking about a longer framework of cooperation".

South Korea's crude oil imports from the United States showed a significant increase past year. But there were still some worrying signs for producers.

The International Energy Agency (IEA), in its monthly report, said that global oil stocks have tightened substantially, aided by OPEC cuts, demand growth and Venezuelan production hitting near 30-year lows.

"Explosive growth in the USA and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico", the IEA said, predicting that most of the 1.3 billion barrel per day expansion in global markets driven by a recovering world economy will go to OPEC's rivals.

If oil prices fall, markets panic, and OPEC sweats.

Finally, a statement by Russia's energy minister highlighting his concern that the market is not completely rebalanced, and a perception that the market continues to be vulnerable to various geopolitical risks added to the bullish outlook.

The OPEC+ global monitoring commission says the earlier decision to extend the production cut deal for the current year should remain unchanged, Russia's Energy Minister Alexander Novak told reporters on Sunday, TASS reported. The government ministers had a meeting in Oman earlier, discussing the introduced quotas and the situation on the oil markets.

Mr Al Falih said the global economy's recovery and supply cuts have helped shrink global oil inventories and the oil market will return to balance in 2018. "And we are going to work together", he said ahead of the joint ministerial committee which oversees implementation of the production cuts.

In other news, the US oil rig count fell by five rigs in the week through January 19, according to Baker Hughes.

Meanwhile, on Thursday OPEC appeared concerned that higher prices will prompt higher-cost producers in the United States to raise their output.

Crude oil prices started the year on a historic rally, moving from $66.65 per barrel for Brent, the global benchmark, to its highest close in four years, just above $70 per barrel, in a span of about a week and a half.

X The cartel's forecast for USA output growth this year was revised up by 110,000 barrels per day to 820,000 bpd, as higher crude prices encourage an increase in conventional production. February heating oil shed 0.2% to $2.058 a gallon, with prices down about 1.3% for the week. "Generally, our colleagues have said and confirmed one more time that they are committed to such more stable situation and balance and have no plans to increase [oil] production", Novak said.

Other reports by Click Lancashire

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