Wednesday, 17 January, 2018

US Crude Oil Price Hits $60 a Barrel, Highest Since Mid

Brent weekly chart Brent weekly chart
Kenneth Drake | 01 January, 2018, 04:11

Oil prices dipped today but stayed close to their highest in two and a half years, as data showed strong demand for crude imports in China and on increased refining activity in the USA that drew more crude from inventories.

Again, the Energy Information Administration data released on Thursday showing a drop in domestic oil production (to 9.75 million barrels per day last week from 9.79 million bpd the week before) was credited for WTI's strong performance, while traders boosted Brent prices on news that China has issued crude import quotas totaling 121.32 million tons for 44 companies in its first batch of allowances for 2018.

Oil's revival from the biggest crash in a generation persisted, with prices set for a second annual gain after weathering everything from hurricanes and Middle East conflict to the tussle between OPEC and US shale. Brent is up 17 percent since the beginning of the year and U.S. West Texas Intermediate is 12 percent higher.

Heavy crude oil price in the same period increased by 52 cents and surged to $61.01 per barrel.

"The tug-of-war between OPEC and the USA will continue to pressure oil from trading above $60 a barrel in 2018", said Kim Kwangrae, a Seoul-based commodities analyst at Samsung Futures Inc.

Refiners have profited in recent months as the spread widened between U.S. crude and Brent futures prices.

WTI for February delivery settled at $60.42 a barrel, up 58 cents, on the New York Mercantile Exchange. Since the start of the year, Brent and WTI have risen by 17 and 12%, respectively, although the price rises from mid-2017 are much stronger, at almost 50%.

WTI prices were further boosted by a fall in U.S. commercial crude storage levels, which dropped by 4.6 million barrels in the week to December 22 to 431.9 million barrels, according to the EIA.

Oil markets have tightened after a year of production cuts led by Middle East-dominated Organisation of the Petroleum Exporting Countries (OPEC) and Russian Federation.


Lipow said he expected US crude prices to creep up to around $63 a barrel by the end of next year, while Brent would remain around $67 a barrel as USA oil exports rise to record levels.

Trading was typically thin at year end, with many traders on vacation.

In the most recent week, U.S. production dipped modestly to 9.75 million bpd from 9.79 mln bpd the previous week.

"The U.S. shale impact is now encroaching on uncharted territory", analysts at RBC Capital Markets wrote this month, saying it had "redrawn the global crude flow map".

Inventories are now down by nearly 20% from their historic highs last March and well below this time past year or in 2015.

In worldwide markets, China has issued crude oil import quotas totalling 121.32 million tonnes for 44 companies in its first batch of allowances for 2018.

Pipeline outages in Libya and the North Sea have also supported prices.

The Forties pipeline was already pumping close to normal levels, trading sources said.

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