The light, sweet crude oil contract for January delivery fell more than 80¢ but still settled above $58/bbl Nov. 27 on the New York market while Brent crude oil for January fell slightly but closed above $63/bbl.
Ole Hansen, head of commodity strategy for Saxo Bank, anticipates what he calls “a nervous trading week” pending the Nov. 30 meeting of the Organization of Petroleum Exporting Countries in Vienna.
OPEC members and non-OPEC producers, including Russia, are widely expected to extend production-cut targets beyond a March 2018 expiration.
Hansen believes the major producers need to keep 1.8 million b/d off the market for at least another year. That is the current production-cut target set in late 2016.
“The current gap between world demand growth and non-OPEC supply growth only leaves room for OPEC to make a small expansion of around 200,000 b/d next year,” Hansen said.
“These barrels could, stability permitting, be provided by Iran, Nigeria or Libya, all of which are currently exempt from the production-cut deal,” Hansen said.
ESAI Energy issued a research note saying it believes the deal will be extended, perhaps in phases, but Russian producers increasingly will resist compliance, leading to an eventual unraveling in 2018.
Another extension of production-cut targets would keep Russia companies from increasing oil production capacity, ESAI said.
Energy prices
The January 2018 light, sweet crude contract on the New York Mercantile Exchange dropped 84¢ on Nov. 27 to $58.11/bbl. The February 2018 contract fell 75¢ to $58.16/bbl.
The NYMEX natural gas price for December increased 11¢ to a rounded $2.93/MMbtu. The Henry Hub cash gas price was $2.82/MMbtu.
Heating oil for December edged down less than a penny to remain at a rounded $1.95/gal. The NYMEX reformulated gasoline blendstock for December gained less than 1¢ to a rounded $1.79/gal.
The Brent crude contract for January 2018 on London’s ICE decreased 2¢ to $63.84/bbl. The February 2018 contract was down 9¢ to $63.38/bbl.
The gas oil contract for December was up $5.75 to $564.25/tonne.
OPEC’s basket of crudes was $61.51/bbl on Nov. 27, down 13¢.
Contact Paula Dittrick at [email protected].
