Light, sweet oil prices fell on Jan. 19 to settle at $63.37/bbl, its lowest closing since Jan. 9. The price drop came after the International Energy Agency forecast 2018 US crude production will be higher than production from Saudi Arabia.
IEA raised its forecast for US crude oil growth this year to 1.1 million b/d from 870,000 b/d. Overall US crude production is expected to reach above 10 million b/d, a level last hit in 1970.
In its January Oil Market Report, IEA said US crude production could rival Russia soon (OGJ Online, Jan. 19, 2018).
Ole Hansen, head of Saxo Bank commodity strategy, said the Organization of Petroleum Exporting Countries appears to have resolved to comply with its production-cut targets through Dec. 31. Saudi and Russian officials discussed the oil market during a weekend meeting in Oman.
Saudi Arabia and Russia officials vowed “unwavering resolve” to limit oil production, saying production-cut agreements could continue beyond yearend. They remain confident that world oil supplies are declining despite rising US shale production.
This contrasts with late last year when Russian officials suggested they might reconsider their support for oil-production cuts.
Hansen said rising non-OPEC production is being offset by strong demand and falling crude oil inventories.
“Strong cooperation between Russia and Saudi Arabia, two countries often seen as adversaries on the global stage, is the main reason behind the successful implementation of the 2016 agreement,” to cut production in support of oil prices, Hansen said.
Separately, the US Energy Information Administration said US oil production climbed for the week ended Jan. 12 to 9.75 million b/d, up 258,000 b/d from the previous week (OGJ Online, Jan. 19, 2018).
“Looking ahead, both West Texas Intermediate and Brent have stabilized following the month-long surge,” in oil prices, Hansen said. “Resistance at $70[/bbl] on Brent and $65[/bbl] on WTI look firm for now with the market in need of consolidation.”
Energy prices
The February light, sweet crude contract on the New York Mercantile Exchange fell 58¢ on Jan. 19 to $63.37/bbl. The March contract also decreased 58¢ to $63.31/bbl.
The NYMEX natural gas price for February edged down less than 1¢ to remain at a rounded $3.19/MMbtu. The Henry Hub cash gas price fell 20¢ to $3.18/MMbtu.
Ultralow-sulfur diesel for February edged down less than 1¢ to remain at a rounded $2.06/gal. The NYMEX reformulated gasoline blendstock for February dropped 2¢ to a rounded $1.86/gal.
The Brent crude contract for March on London’s ICE declined 70¢ to settle at $68.61/bbl on Jan. 17. The April contract was down 68¢ to $68.24/bbl. The gas oil contract for February was $608/tonne, down $3.25.
OPEC’s basket of crudes was $66.48/bbl on Jan. 19, down 72¢.
Contact Paula Dittrick at [email protected].
