Supply discipline and demand to prop up oil prices in 2018

Supply discipline and demand to prop up oil prices in 2018

Supply discipline and demand to prop up oil prices in 2018

February WTI crude oil futures (DWT)(SCO) contracts rose 0.8% to $60.3 per barrel at 12:45 AM EST on December 29, 2017-the highest level since June 2015.

However, the strong close outs of the year herald what many experts say is the inevitable outcome of high prices: increased USA production in 2018, which will clash directly with the Organization of the Petroleum Exporting Countries' (OPEC) ongoing attempt via its extended output cutbacks to rebalance the market. Brent crude futures-the worldwide benchmark-were also up, rising 45 cents or 0.7% to $66.61 a barrel, CNBC reported.

Brent broke through $67 earlier this week for the first time since May 2015.

Nationwide stockpiles fell 4.6 million barrels last week to the lowest level since October 2015, according to the Energy Information Administration Thursday.

"With that partially offsetting production cuts by Opec and Russian Federation, the market will have to get confirmation that global inventories will keep coming down", Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone.

U.S. output has surged overall this year, hitting a 46-year high in October when producers pumped 9.6 million barrels a day, according to federal data. Inventories excluding the nation's strategic reserve have declined more than 11 per cent in the previous year.

U.S. commercial crude inventories fell by 1.9 million barrels in the week through November 17, a report from the U.S. Energy Information Administration showed.

Strong OPEC compliance with the supply pact should lend support to prices, analysts said.

Countering those cutbacks, United States oil production has soared more than 16% since mid-2016 and is approaching 10 million bpd, trailing only OPEC kingpin Saudi Arabia and Russian Federation.

There are also expectations in the market that OPEC's next meeting on November 30 will agree to extend cuts beyond the current expiry date in March 2018.

Consultancy JBC Energy said Libyan pipeline outages had "no major impact on exports".

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