Oil Market Quotations Stable Supported by OPEC Agreement

Ann Santiago
February 2, 2018

Crude oil prices turned lower at the start of the week.

With supply tightening, the relationship has reasserted itself.

WTI prices have been on an upward trend since February 2016.

World oil prices are rising on Friday amid investors' expectations of data on the dynamics of the number of drilling rigs in the US for the week. While OPEC and its partners have managed to push oil prices back to three-year highs, rising USA shale production threatens to break the rebalancing process. The number of oil drilling rigs increased by 12, or 1.6 percent, to 759 units. That may signal a further increase in US crude output, which jumped to 9.92 million barrels a day in the seven days to January 26, the highest level since the early 1970s and close to the output of top producers Russian Federation and Saudi Arabia.

Over the past 10 years, production has roughly doubled. Companies are shifting management strategies to pursue profit over growth, and the technological advancements will have to continue.

OPEC and its partners chose to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry. New drilling and production techniques have opened up billions of barrels of recoverable USA oil in shale rock formations in the past 10 years, reversing decades of declining output and turning the nation into an exporter.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ CHART: U.S. oil may bounce more to $67.30http://tmsnrt.rs/2EykutB CHART: Brent oil may bounce more into $70.15-$70.58http://tmsnrt.rs/2Ezbl3OOPEC compliance with production cut targets http://reut.rs/2DT47qk ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^. Yet the size of these inventories can not be predicted yet, especially with the long string of draws during the winter, when demand for fuel is usually lower.

The EIA also reported the biggest increase in crude oil stocks since March past year, a rise of 6.8 million barrels.

Inventories are reported with a two-month lag, so by the time they have reached the five-year average, OPEC may be late to react.

The bank also raised its "2H18-2019" Brent-WTI differential to $5.50 a barrel, with risks of further widening this year. OPEC has a production ceiling of about 33.7 million b/d under the agreement, when the 14 members' quotas are added up, including for formerly exempt Libya and Nigeria, who were given a combined 2.8 million b/d cap for 2018. "Crude oil imports are down 20 percent from 2006 and today we are competing with the Middle East in the export market".

Giovanni Staunovo, a commodity analyst for UBS, told UPI the record-breaking output from the United States would normally send oil prices into negative territory. Increased adherence to the OPEC production cut program is now underpinning the market.

Aside from Canada, countries in Asia and Europe have been some of the largest recipients of US crude oil since the restrictions were lifted.

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