Light, sweet crude settled modestly higher on the New York market on Sept. 29 after waffling between gains and losses during the trading session, while the weekly US oil-directed rig count climbed for the first time in 7 weeks, a possible indicator that higher prices are encouraging drilling.
The US crude oil price benchmark rose 9.4% during September, marking the highest monthly gain since April 2016, the Wall Street Journal reported. But oil prices dropped in early Oct. 2 trading upon a strong dollar. Oil trades in US dollars so a stronger dollar makes oil more expensive for investors using other currencies.
Baker Hughes said its overall rig count showed 5 additional active units for the week ended Sept. 29, making a total of 940. The count had fallen in 6 of the previous 8 weeks (OGJ Online, Sept. 29, 2017).
Oil-directed rigs jumped 6 units to 750, down 18 since Aug. 11. Gas-directed rigs edged down 1 unit to 189. One rig considered unclassified remained operating.
Ole Hansen, Saxo Bank head of commodity strategy, attributed recent oil price gains to improved market fundamentals during the last 4 weeks. He noted the potential for world geopolitics to sway oil prices.
“Key developments this past week were signs that the US energy market has begun returning to normal after hurricane disruptions while the Kurkish vote in northern Iraq raised concerns about supply being cut from the oil-rich region,” Hansen said in a Sept. 29 note.
The Kurdish independence vote raises confrontation risks because Turkey, Iraq, and Iran oppose it.
Hansen foresees record US exports and Libya’s intent to boost production by 30% before Dec. 31 putting some downward pressure on Brent relative to the US oil benchmark.
“We raise our Brent crude oil band by $5 to a range between $50-60/bbl,” Hansen said. “In the short term, and baring any escalation in northern Iraq, the performance [during the week ended Sept. 29] has increased the risk of a correction, which potentially could see Brent reverse lower towards $54/bbl.”
Fitch Ratings of Chicago said lower global production costs, US shale growth potential, and shale's ability to quickly respond to changing market conditions likely will keep average annual oil prices below $60/bbl in the long term.
“But oil prices will remain volatile and could periodically exceed our assumptions,” the credit ratings agency said Oct. 2. “We remain skeptical about the effectiveness of OPEC's production cuts to rebalance supply and demand in the near term as well as to materially reduce crude stocks given the exclusion of Libya and Nigeria—both producing at higher levels since the cut.”
The Organization of Petroleum Exporting Countries and some non-OPEC producers have production-cut targets of 1.8 million b/d in place through March 2018.
Energy prices
The November light, sweet crude contract on the New York Mercantile Exchange increased 11¢ to settle at $51.67/bbl on Sept. 29. The December contract gained 8¢ to settle at $51.95/bbl.
The NYMEX natural gas price for November dropped 1¢ to $3/MMbtu. The Henry Hub cash gas price fell 8¢ to $2.89/MMbtu.
Heating oil for October was down 2¢ to a rounded $1.81/gal. The NYMEX reformulated gasoline blendstock for October fell 2.5¢ to a rounded $1.61/gal on Sept. 29.
The Brent crude contract for November on London’s ICE dropped 13¢ to $57.54/bbl. The December contract was down 37¢ to $56.79/bbl. The gasoil contract for October was $548.25/tonne, down $2.50.
OPEC’s basket of crudes for Sept. 29 was $55.20/bbl, down 39¢.
Contact Paula Dittrick at [email protected].