It was a volatile week with stock markets crashing and oil prices falling by nearly $7 a barrel from recent highs. Behind the price collapse was a stronger dollar, the break in the equity markets, ever increasing US shale oil production, and an unexpectedly large jump in the rig count the week before last. At Friday’s close New York oil futures were slightly below $60 a barrel and London’s Brent was not far behind at $62.79. With the Brent/WTI price spread below $3 a barrel, there will be less incentive to buy US crude when shipping costs are considered.
Oil prices fell for most of last week, but then rebounded to close at $56.55 in NY ($62.73 in London) on Friday. This was only a dollar or so a barrel below the recent high set the week before last. As usual, there were numerous factors impacting oil prices. OPEC reported a small drop in October production due to lower output from Iraq, Nigeria, and Iran. OPEC also said it expects global demand for oil to grow by 1.5 million b/d this year and again in 2018. The IEA is not so sure that demand will be so strong, noting that crude prices have risen by roughly 20 percent since early September and now the “market balance in 2018 does not look as tight as some would like and there is not, in fact, a ‘new normal’.”
Oil prices leveled off last week with New York futures closing at $56.74, up more than $20 a barrel since June. Brent closed about $7 higher at $63.52. As has become normal these days, multiple factors impacted the oil prices last week pulling the markets in both directions. While the arrest of over 200 important princes, ministers and industrial leaders in Saudi Arabia on charges of corruption early in the week roiled the markets for a few days, by the end of the week the markets were largely ignoring what could morph into a major Middle East crisis or even hostilities.
The price surge, which began in mid-September, continued last week with NY futures closing Friday at $55.64 and London at $62.07. The $6.50 spread is leading to ever higher US exports which are now above 2 million b/d. Crude prices are at their highest level in over two years. Behind the price surge has been the steady stream of hints from the Saudis and the Russians that they are ready to back an extension of the production freeze through 2018 at the November 30th meeting. Some are asking whether the major oil exporters will be willing to continue a production freeze if prices move much higher. There now is a solid perception among traders that the global crude stocks are declining and that demand is rising. This in addition to the OPEC hype is contributing to the price surge.
London futures closed above $60 a barrel last week for the first time since 2015. New York futures are now about $6 a barrel lower than London, increasing the incentive for foreign refiners to buy and export more US oil. The main impetus for the price surge on Friday was comments by Saudi Crown Prince bin Salman that he backs an extension of the OPEC production freeze until the end of next year. Coupled with the Prince’s statement were upbeat OPEC pronouncements about the increasing demand for its oil and the dubious proposition that compliance with the production cut was now at 120 percent of the agreed numbers. Beyond the hype, however, are real concerns that the Iraqi, Iranian, and Venezuelan situations could deteriorate and lead to lower exports.
Oil prices were little changed last week with New York futures trading around $52 a barrel and London around $57. Numerous factors continue to affect oil prices: Baghdad’s seizure of the Kirkuk oil fields and the consequent reduction in exports; a stronger US dollar brought on by the prospect of a tax cut; a falling US oil-rig count; a large drop in US crude inventories due to the recent hurricanes and unprecedented exports; the brightening prospects for a nine-month extension of the OPEC production freeze; and finally a warning that the China’s economy may not be doing as well as many believe. When all these forces pulling in various directions were netted out, there was little change.
Prices climbed last week with Brent up almost 3 percent to $57.17 a barrel and WTI up over 4 percent to close the week at $51.45. The major developments affecting prices was an unexpected jump in Chinese oil exports of 1 million b/d in September to 9 million and the announcement that the President would not certify Iranian compliance to the nuclear accord. Statements by OPEC and Russian officials concerning a possible extension of the production freeze and the growing concerns that there will be hostilities in the aftermath of the Kurdish independence vote also supported prices.
US crude futures fell to $49.23 on Friday for a weekly loss of nearly 5 percent – the first weekly drop in more than a month. Hurricane Nate struck the US Gulf Coast Saturday night forcing the temporary closure of some 70 percent of US offshore oil production. In comparison with other recent hurricanes, Nate was relatively weak, so the damage to oil production and refining should be minimal and production back to normal in a day or two.
After climbing steadily for over a month, oil prices slid downwards about a dollar a barrel last week ending up circa $51.50 in New York and $56 in London. The summer price surge took oil to the highest seen in two years with New York futures climbing from $42 a barrel in late May to peak above $52 last week. Several factors sustained the summer price surge. OPEC and the IEA released reports forecasting that global consumption would be higher. The Kurd’s independence referendum which led to Turkey threatening to block Kurdish oil exports was another factor, as were the effects of the hurricanes in the Gulf of Mexico.
Oil prices continued to climb last week with US futures closing at $50.66 and London at $56.90. The $6 spread between NY and London is mostly due to the aftermath of the US hurricanes which have resulted in the growth of US crude inventories while elsewhere they have declined. Market sentiment has changed in the last few weeks with many now convinced that oil prices will be moving higher due to the OPEC production cuts and strong demand for oil products brought on by the relatively low prices. The IEA just upgraded its demand growth estimate for 2017 to 1.6 million b/d. If growth like this continues, it will eat through the global surplus rather quickly.
Oil prices rose steadily last week with US crude futures briefly topping the psychological barrier of $50 a barrel and with London futures closing at $55.62. Most analysts are talking about higher prices ahead. The IEA’s monthly report says that the global oil supply contracted in the past month and that demand remains strong. These judgments came despite the US hurricanes that shut down over 25 percent of US refining capacity and took a good, but as yet unknown, bite out US demand in the Southeastern US and along the Gulf Coast.
Oil prices rose some $3 a barrel for the first three days last week and then collapsed on Thursday and Friday as Beijing announced its plans to reduce the capacity of its small “teapot” refineries, and Hurricane Irma closed in on Florida reducing demand for oil products in the state. Recovery from the Texas hurricane, Harvey, continues with 8 of 20 refineries that were closed by the hurricane now back to normal operations. The ports of Corpus Christi and Houston are returning to normal, and several other refineries report they will be back in operation in the next week or two. Gasoline prices in the US are starting to retreat from storm-induced spikes as refineries and pipelines return to normal. The unusually large crude and product reserves in stockpiles have helped cushion price increases.
As the severe flooding spread further east last week, closing down numerous refineries and causing widespread devastation, it is becoming apparent that it will be several weeks before the full impact on the US oil industry and indeed global oil markets can be assessed. At one point last week the hurricane shut down a quarter of US refining capacity, some 4.0-4.4 million b/d, but oil production outages mostly from Gulf production came to less than 1 million b/d. With a lot of oil going into storage and refinery demand well below normal, US oil prices have moved very little in the past week, while Brent has remained stronger in anticipation that Europe will be called on to replace the missing US barrels in the next few weeks.
It likely will take several weeks to assess the impact that Hurricane Harvey will have on the US oil industry. As of Monday morning, the storm is still dumping large amounts of rain on Houston and its refineries. Weather forecasts are predicting that the storm will continue to cause heavy flooding along the Gulf Coast and will move further east, possibly closing or damaging additional oil production facilities in Louisiana.
Oil continues to trade in one of the narrowest ranges seen in the last decade as the efficacy of the OPEC production cap weighs against increasing US and other production increases and slowing Chinese demand. Last week saw oil prices falling for three days and then rebounding sharply on Friday to close at $48.50 in New York as a combination of a large drop in US crude stocks, a weaker US dollar, and a falling rig count supported prices.
It has been two weeks of mixed signals as to the course of oil prices. Last week prices fell around 1.5 percent, closing at $48.82 in New York on concerns that the OPEC/NOPEC collation was not following through on its pledge to cap production. Even though US stocks continue to fall, much of this is due to increasing exports of light oils and finished oil products and not to increased domestic demand. On Friday, the IEA said that although the oil markets were slowly balancing, it is not going quickly. OPEC and other friends of higher oil prices continue to release optimistic reports, but the consensus seems to be that oil prices will stay around their current levels for the rest of the year unless there is a major geopolitical upheaval.
Oil prices were strong last week with New York futures closing about $4 a barrel higher for the week at $49.71 and London at $52.52. Behind the move was another unexpectedly large decline in US stockpiles of 7.2 million barrels. This decline was brought about by a high level of US refinery consumption of almost 17.3 million b/d of crude the week before last. This was 620,000 b/d higher than in the comparable week in 2016. A reduction in Saudi shipments to the US was also seen as responsible for the unusually large decline in inventories.
The markets remain confused about the future of oil prices as analysts attempt to interpret alternating bullish and bearish signals. Last week prices rose on Tuesday and Wednesday while falling on Monday, Thursday, and Friday leaving US futures at $45.77 or about $1 below where they started the week. With the US now exporting circa 1 million barrels of oil each day and imports up only about 300,000 b/d over last year, US stocks have been falling of late. There has been some increase in US consumption, but a rapid rise in US oil product exports is clouding the picture as to whether the high levels of US refinery output are being consumed domestically or being shipped abroad.
Oil prices climbed steadily last week, ending up Friday about $5 a barrel higher in New York at $46.54 with London the usual $2.50 or so higher. Although market concerns about oversupply have not gone away, a 7.6-million-barrel decline in US crude stocks and better demand from Europe and China was enough to keep the markets climbing higher. Rising prices were kept in check, however, by the continuing increases in oil production in the US, Canada, Libya and Nigeria. There are also concerns that adherence to the OPEC production cut is slipping and many traders are losing confidence in OPEC’s ability to balance the markets with the current level of effort.
Last Monday, oil prices rose for the eighth consecutive session closing in New York at $47 a barrel and setting a record for the longest gaining streak in nearly eight years. This surge came on speculator concerns that increases in US shale oil production were starting to slow. The rest of the week was mostly downhill with NY futures closing at $44.23. The slide came among reports that OPEC was not interested in further price cuts; a resumption of the increase in the US oil-rig count of seven rigs, adding to the run of 23 weeks of steady gains before the count fell by one the week before last; US crude production and exports continuing to gain; and OPEC exports increasing by 220,000 b/d in June to 32.49 million b/d.
After a decline of nearly $10 a barrel since mid-May, oil prices rebounded sharply last week with New York futures climbing from below $43 to close at $46 a barrel. Although many are still worried about excess oil inventories, most traders are optimistic that the worst is over and that higher oil prices stemming from the OPEC production cut are ahead. Many see the recent surge in US shale oil production slowing due to oil prices being in the $40s.
Oil prices continued to slide last week with Brent falling below $45 on Thursday and WTI falling below $43. Prices have now dropped by more than 20 percent since the start of the year, and Brent crude will likely post its worst first half since 1997. As normal of late, prices fell on increasing production in the US, Canada, Nigeria and Libya with little solid indication that the OPEC/NOPEC consortium is yet willing to make further production cuts. While the sharp production gains in Libya and Nigeria are recoveries from geopolitical production outages, some are forecasting that the surge in US shale oil production could run on into 2018 provided oil prices remain high enough to support additional growth.
In the last month, US oil prices have fallen from close to $52 a barrel to below $45. Partly due to the large exports of US crude which have been around 1 million b/d in recent weeks, London prices have been running only about $2 a barrel higher than the US. Last week a report from the IEA predicting that the oil glut would continue into 2018 or beyond, combined with an unexpected jump in US commercial petroleum stocks, to push oil prices down by $2 a barrel to touch a low of $44.50 on Thursday before a slight recovery on Friday.
During the past month, there have been several important developments which could have a major impact on the course of oil prices and production in the next few years. First was the OPEC/NOPEC decision to extend the current 1.8 million b/d production cut for another 18 months despite increasing evidence that increasing US shale oil output and rebounding Libyan and Nigerian production are offsetting the production cut. Because of the timid nature of the OPEC decision, increasing stockpiles and higher oil production, the price of crude has fallen some 11-12 percent in the last three weeks leaving US futures below $46 and Brent below $48 a barrel.
The price slump which began in early April continued last week with NY futures falling below $46 a barrel on Thursday, down from nearly $54 last month. Behind the move are fundamentals saying that a combination of higher US crude production and rebounding Libyan output are offsetting the 1.8 million b/d OPEC/NOPEC production cut. In the past week, several oil ministers supporting the production cut have issued reassuring statements as to how well the cut is being observed; that the cut likely to be extended until the end of the year; and that the 3rd quarter will see substantial progress in easing the oil glut. Outside analysts continue to say that deeper cuts and extending on into 2018 will be necessary to offset booming production in countries not subject to the cut.