MARKET WATCH: Crude oil prices rally on proposed production-cut extension

Light, sweet crude oil for June delivery and Brent crude for July delivery both jumped by about $1/bbl May 15 after Saudi Arabia and Russia oil officials jointly supported extending production-cut targets into 2018.

Light, sweet crude oil for June delivery and Brent crude for July delivery both jumped by about $1/bbl May 15 after Saudi Arabia and Russia oil officials jointly supported extending production-cut targets into 2018.

Members of the Organization of Petroleum Exporting Countries will meet in Vienna May 25. The cartel would have to agree to the proposed extension until Mar. 31, 2018.

The International Energy Agency issued a report May 16 citing record OPEC production in late 2016, which is making it difficult to reduce lingering ample world oil inventories.

IEA said that if OPEC and some major non-OPEC producers extend their existing production-cut targets into this year’s second half, “stocks at the end of 2017 might not have fallen to the 5-year average, suggesting that much work remains to be done in the second half of 2017 to drain them further.”

Meanwhile, production from Libya and Nigeria has been increasing. Nigeria was exempted from the OPEC agreement. News reports indicate Nigerian oil workers have extended a strike to Chevron Corp., Royal Dutch Shell PLC, and Eni SPA subsidiary Agip.

The strike started at ExxonMobil Corp. last week in protest of what labor unions call the improper dismissal of ExxonMobil employees. Nigerian labor unions have held several strikes in recent months, hindering oil production.

Libya’s authorities said Libya produced 800,000 b/d last week, which analysts call the highest level since 2013. Nigerian production is forecast to reach 2 million b/d this year. In addition, US oil production continues to rise.

Energy prices

The light, sweet contract for June crude oil delivery gained $1.01 to close at $48.85/bbl on the New York Mercantile Exchange May 15. The July contract gained 99¢ to settle at $49.16/bbl.

The natural gas price for June was down 7.5¢ to a rounded $3.35/MMbtu. The Henry Hub cash gas price gained 2¢ to $3.27/MMbtu on May 15.

Heating oil for June increased 1.6¢ to a rounded $1.51/gal. Reformulated gasoline stock for oxygenate blending for June gained nearly 2¢ to a rounded $1.60/gal.

The Brent crude contract for July on London’s ICE was up 98¢ to $51.82/bbl. The August contract was up 96¢ to $52.01/bbl. The June gas oil contract was $459/tonne, up $10.25.

OPEC’s basket of crudes was $49.72/bbl on May 15, up $1.45.

Contact Paula Dittrick at paulad@ogjonline.com.

More in General Interest