The light, sweet crude oil contract for February delivery rose modestly on the New York market Jan. 6 to settle at nearly $54/bbl while the Brent crude oil price for March delivery rose on the London market to settle above $57/bbl.
But the benchmarks both fell in early Jan. 9 trading, which analysts attributed to a higher US rig count and to doubts over promised production cuts by major producers, both by members of the Organization of Petroleum Exporting Countries and by some non-OPEC producers, including Russia.
“We view upside potential on Brent crude oil beyond $60/bbl as limited at this stage,” said Ole Hansen, head of Saxo Bank commodity trading. “The forward curve on Brent crude is currently seeing the highest price during September. This is happening on the assumption that the production cuts will only last 6 months and that US production is likely to pick up speed into the second half.”
He sees Brent prices as being capped at $60/bbl by “the risk of cheating,” by some OPEC members along with rising production from Nigeria and Libya. Concerns about the timing of an anticipated increase in US unconventional production increases also will dampen oil prices, he said.
The US drilling rig count began 2017 with its eighth consecutive weekly rise. Baker Hughes Inc.'s tally rose 7 units to 665 for the week ended Jan. 6 (OGJ Online, Jan. 6, 2017).
The US rig count started 2016 at 664 working rigs and exited the year at 658 (OGJ Online, Dec. 30, 2016).
Energy prices
The February crude oil contract on the New York Mercantile Exchange gained 23¢ on Jan. 6 to close at $53.99/bbl. The March contract climbed 19¢ to $54.87/bbl.
The natural gas futures contract for February was up a penny to a rounded $3.28/MMbtu. The Henry Hub spot market for gas closed at $3.32/MMbtu, up 2¢.
Heating oil for February gained less than 1¢ to a rounded $1.70/gal. Reformulated gasoline stock for oxygenate blending for February edged down less than 1¢ to a rounded $1.63/gal.
The Brent crude contract for March on London’s ICE was up 21¢ to $57.18/bbl. The April contract increased 20¢ to $57.68/bbl. Gas oil for January closed Jan. 6 at $493.25/tonne, up $5.
The average price for OPEC’s basket of benchmark crudes for Jan. 6 was $53.50/bbl, up 48¢ from the previous day.
Contact Paula Dittrick at [email protected].
