Hope For 2018 As Price Of Crude Oil Rises

Hope For 2018 As Price Of Crude Oil Rises

Jeff Currie, global head of commodities research for Goldman Sachs, believes that if prices keep rising it will trigger greater investment by USA shale drillers or central bank interventions to temper inflation: "OPEC members do not want to see that; we'll see more noise and rhetoric if prices trade above $70 a barrel in coming days to push this market back down". West Texas Intermediate crude finished the session up 23 cents at $63.80, after breaking through $64 a barrel for the first time since December 2014.

OPEC and non-OPEC participants agreed on November 30, 2017, to extend the production cuts through the end of 2018 in an effort to reduce global oil inventories.

"Oil prices have been undeniably bullish this week despite the lingering concerns over the current bull rally running out of steam", said Lukman Otunuga, research analyst at FXTM.

Another factor behind the rise in prices is the devastating hurricanes along the U.S. Gulf Coast that shut down refineries and reduced stockpiles of fuels such as gasoline and diesel. Markets remained buoyed by the comments throughout the session, shrugging off data that suggested the USA production may continue to surge.

With the cold front lifting this week, the focus will quickly shift back to whether USA production can head even higher - as many forecasters expect - particularly given this recent boost in oil prices.

The OPEC agreement, however, does not include USA shale oil producers, where drillers use advanced methods like hydraulic fracturing to squeeze oil and gas from tight rock formations.

On Wednesday, the U.S. Energy Information Administration said crude inventories C-STK-T-EIA fell nearly 5 million barrels to 419.5 million barrels last week. An eight-week long downward spiral in USA crude inventories has helped boost prices, with some analysts suggesting $80 is achievable if the Organization of the Petroleum Exporting Countries and its allies stay disciplined in limiting output.

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According to NordFX, ICE Brent futures (London) for March delivery cost $62,2/b after gaining 0,5% on that day and 3,1% since the start of the trading week.

OPEC's aim is to ensure the stabilisation of oil markets.

According to AAA, the current average US price for a gallon of regular gasoline is almost $2.51, up more than two cents since Wednesday and almost three cents higher in the past month.

EIA data also showed United States production fell by 290,000 barrels per day (bpd) to 9.5m bpd, likely due to a cold snap across the country.

Such an outcome will provide a huge upswing in valuation (and share prices) of the likes of Woodside Petroleum Limited (ASX: WPL), Oil Search Limited (ASX: OSH), Santos Ltd (ASX: STO) and Origin Energy Ltd (ASX: ORG). WTI Crude oil is now trading at $63.39 per barrel, down 0.64% on the day. United States distillate stocks jumped 8.899 million barrels the week ending December 29 to 138.8 million barrels.

Commerzbank noted that China imported 7.95M barrels of crude oil per day in December - 12% less than in November, which was a very strong month.

Q: What will become of global crude oil supply and demand in the mid- to long-term?

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