WTI Crude oil settles above $60 a barrel
Orbex senior executive Vince De Castro examines how crude oil prices were seen initially declining in the earlier part of the year in 2017. This came amid increases in production from countries such as Nigeria and Libya which were originally exempt from the OPEC supply cut agreement.
Vince De Castro, Head of Marketing at Orbex, look at the comback that is now being made by one of the world’s raw materials benchmarks, crude oil.
Crude oil prices continued to maintain a strong rally last week and managed to close the week and the year, settling above the $60 a barrel handle. Oil prices reclaimed the $60 barrier for the first time in the last two years and closed the year with a 12% gain. Oil prices were supported by the fundamentals that included declining inventories and increased demand.
Brent crude oil also sparked an impressive rally as the price of Brent futures rose 17% in the year. Oil prices are seen making a comeback following efforts from OPEC nations and Russia to cut production in a bid to raise oil prices. Demand for oil was also seen to be rising in China which contributed to the bullish fundamentals.
Crude oil futures for February delivery, settled at $60.42 a barrel marking the highest close since June 2015. Brent oil futures rose 45 cents to settle at $66.62 a barrel after price briefly flirted with the $67 handle.
These were the highest levels that Brent futures rose to since May 2015.
Temporary fuel pipeline outages also helped oil prices to maintain their momentum and underlined that the global supply glut has been shrinking since 2014.
Crude oil prices were marked by doubts earlier this year as to whether OPEC and Russia would be able to manage the production cuts.
However, in recent months, OPEC member nations were seen adhering to the production limits, in what is seen as a concerted effort to push oil prices higher. Crude oil prices were seen initially declining in the earlier part of the year in 2017. This came amid increases in production from countries such as Nigeria and Libya which were originally exempt from the OPEC supply cut agreement.
However, oil prices managed to recover, rising through the second half of the year in 2017. Oil price trend remains towards the upside for the moment as inventories continue to decline.
Oil prices supported by inventory draw and temporary outages
Temporary outages across some major oil pipelines also helped to keep oil prices supported. This included the outages from the North Sea and Libya. The disruptions are expected to be resolved by late January.
Libyan authorities said that repair works the pipelines had already begun while the Forties pipeline has resumed operations and is now operating close to its usual output.
Data from the Energy Information Department (EIA) showed that the U.S. crude oil production rose to a 46-year high in October, leading to higher oil exports and increased demand.
The monthly data showed that U.S. crude oil production rose 16% until mid-2016 with oil production expected to hit 10 million barrels per day (bpd) in 2017. The rally in oil prices has once again spurred activity from the U.S. shale oil industry.
OPEC and Saudi Arabia initially hoped that opening the supply taps could squeeze the U.S. shale oil industry out of the market. However, as oil prices weakened, some of the major oil producing nations also took a hit to their GDP.
This was especially true in countries such as Russia, who’s budgets were closely tied to oil prices.
Last week, the Baker Hughes rig count data showed that the number of active oil and gas rigs fell, totaling 929 active rigs. For the year, the total active rigs increased by 271.
On a weekly basis, the number of oil rigs in the United States did not change much.
