–David Houseknecht, a senior research geologist at the U.S. Geological Survey, says the Smith Bay discovery in Alaska seems to have incredible potential. Then he adds: “But it’s the last one you’d want to bet your retirement money on.” (3/15)
Last week, oil prices underwent their biggest weekly decline in a month as the markets lost confidence in OPEC’s ability to reduce the global oil surplus in the near future. The move was supported by reports that a glut was developing in the physical oil market in the North Sea area as lower Asia purchases, increased shipments of US crude to the EU, and more supplies coming out of storage all served to drive down prices. At week’s end, US futures were once again trading below $50 a barrel and London’s Brent below $52.
After climbing steadily since March 27th, oil prices stabilized at the $53-55 level late last week. As usual, prices got a boost from various oil minister’s comments about how well they were doing in meeting their production cut goals and how they are considering extending the cuts until the end of the year. The monthly OPEC report shows that the cartel’s production jumped by about 1.2 million b/d after production cuts were first seriously discussed last fall, and then fell about the same amount after cuts started in January. The net result was to leave OPEC’s production about where it was through most of 2016.
After falling on Monday on the news that Libya was resuming production from its largest oilfield that was shut down the previous week, oil prices moved higher for the next three days on hopes that the OPEC production cut was having the desired effect. Some believe that oil traders have been too busy watching the well-publicized build in US crude stocks, while excess inventories in other parts of the world are shrinking away unnoticed. Futures prices, which were about $48 a barrel the US the week before last, climbed to over $51 a barrel by Thursday.
Crude prices rebounded sharply last week erasing nearly half the $7-8 selloff that began in early March. The March price drop came on the consensus that increasing crude inventories and ever higher rig counts would offset the 1.8 million production cut that OPEC was trying to orchestrate. At the close Friday, New York futures were at $50.85, and London was at $53.83.
Last week oil prices fell for the third time in a month, closing in New York at just below $48 a barrel. Increasing US crude inventories remain the chief motivation for the price drop as many traders now see higher US production as largely offsetting the OPEC/NOPEC production cuts. OPEC and its allies met in Kuwait last week to consider the situation and to talk about extending the cuts until the end of the year. In the meantime, the US rig count continues to grow amid some doubts as to whether all the new drilling will result in a concomitant amount of production.