USA crude supplies fell by 5.04 MMbbl last week, the American Petroleum Institute was said to report. OPEC itself said its cuts would help balance the market, and said its output had already fallen in December. Last week, the number declined (http://www.marketwatch.com/story/baker-hughes-data-show-us-oil-rig-count-down-for-first-time-in-11-weeks-2017-01-13), but that followed a 10 consecutive weekly increases. Below, we will delve into the details of one of the most challenging years for oil producers and investors in a generation.
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What’s not yet clear is where oil prices will finally stabilize.
OPEC production cuts may have helped propel prices higher, but that doesn’t necessarily mean that they are the primary driver for increased US shale production, the International Energy Agency stated to Bloomberg.
Although coal and crude oil don’t compete directly with each other as fuels, it’s still important to track crude oil prices.
On the positive side of the ledger, there are early signs that OPEC members are meeting their commitments. Saudi Arabia, the cartel’s largest producer, is making good on efforts to lower output. OPEC’s recently announced production cuts sent crude prices to $52.04 per barrel.
Comments from Saudi Arabia regarding progress on the output cuts “is giving the market some increased confidence that cheating will be limited and markets will continue to rebalance”, Brian Youngberg, senior energy analyst at Edward Jones, told MarketWatch. After Iraq agreed to the oil cut, Minister of Oil for Iraq, Jabbar Ali al-Luaibi (Allibi) released a statement indicating Iraq would support the decision and cut oil produciton in Iraq effective January 1 2017. Markets moved in wide swings in response to market reports from the Organization of Petroleum Exporting Countries and the International Energy Agency. That bodes well for a narrowing supply surplus – and ultimately a deficit – as well as falling inventories.
“OPEC is not in control of prices anymore anyway”.
Analysts remain cautious about future price gains because of the overhang of inventory and the increased output of US producers, which can dampen growth and cause prices to decline.
Cutting oil supply is meant to raise oil prices somewhat, creating a more balanced oil market between producers and buyers.
The rise in the USA output is projected at 230,000 barrels daily. United States refinery margins were supported by the recovery seen in the gasoline cracks on the back of healthy domestic demand amid stronger exports to Latin America.
He also says there is a huge market for renewable energy that could reduce demand for crude. Oil prices fell from 5 per barrel in June 2014 to only $29.04 per barrel in January 2016. Indeed, in the most recent week for which data is available, net-long positions declined a bit, raising the possibility that bullish bets have peaked.
USA crude for March delivery rose $1.31 a barrel, or 2.5% to $53.43 a barrel.
Meanwhile oil stocks are falling and demand is rising.
Libya and Nigeria are exempt from participating in OPEC’s production cut plans. “The delta now (with the five-year average) is around 270 million”, he said.
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In December, non-OPEC oil production dropped by 315 thousand b/d to 57.7 mb/d.
