OPEC and non-OPEC producers last month reached their first deal since 2001 to curtail oil output jointly by almost 1.8 million bpd to help stem a fall in oil prices and ease a supply glut.
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“Clearly there are growing doubts that OPEC will succeed in implementing most of the promised production cuts”, said Commerzbank Research.
– EIA again cautioned that the values of futures and options contracts continue to highlight the “heightened volatility and high uncertainty” in the price outlook.
Data on USA crude inventories will be released by the American Petroleum Institute late Tuesday, with figures from the EIA due early Wednesday.
Brent crude oil LCOc1 hit a high of $56.43 a barrel before easing slightly, and it was up 95 cents at $56.05 by 1:00 p.m. ET (1800 GMT).
Despite increases in global oil inventories and USA oil rig productivity, market reactions to the November OPEC agreement to cut production by 1.2 million barrels per day (b/d) starting in January 2017 contributed to rising oil prices in December, when average Brent prices were $9/b above their November level. USA shale’s gains prompted the International Energy Agency (IEA) last month to revise up its forecast for U.S. production growth in 2017 by 70,000 b/d.
Gasoline stocks rose 5 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.6 million-barrel gain.
“The agreement among OPEC and non-OPEC producers at the end of previous year to cut 1.8mb/d [million barrels per day] of global output in 1H17 will have ramifications for USA oil producers”, he says.
According to Opec, the recent pick-up in global economic activity in combination with supportive developments in the oil-market is seen leading to higher economic growth of 3.1% in 2017, following a 2.9% growth in 2016. North American drilling is on the rise, while European and Chinese traders are shipping a record 22 million barrels of crude from the North Sea and Azerbaijan to Asia this month.
Higher prices would give further confidence in tapping these DUCs to cash-starved USA producers, whose lenders are likely looking for these players to increase production programs in 2017 after sweeping operating cost cuts between 2015 and 2016. The agency now estimates that growth will come in 120,000 b/d higher at 1.4 mb/d in 2016 and 100,000 b/d higher at 1.3 mb/d this year thanks to better-than-expected United States crude demand and revisions to Russian and Chinese crude data.
The EIA also revised up its projection for the U.S.’ domestic crude production for this year and the next.
– Total US liquids fuel consumption, which averaged 19.4 million b/d in 2015 and 19.59 million b/d in 2016, is expected to average 19.85 million b/d in 2017 and 20.22 million b/d in 2018. The global benchmark was at a premium of $US2.15 to March WTI.
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“U.S. SPR sales add to bearish pressures on U.S. crude”, Citi said following the release of the bids. The production cut will be reflected in Kuwait’s crude exports, he said. The U.S. has its highest number of rigs in operation, at 529, in more than a year.
