Published: Sat, December 30, 2017
Finance | By Cynthia Curry

Supply discipline and demand to prop up oil prices in 2018

Supply discipline and demand to prop up oil prices in 2018

Brent had a weekly rise of 2.8 percent and USA crude was headed for a 3.3 percent weekly rise. US production is fast approaching the all-time record of 10.04 million barrels a day, set in late 1970, according to EIA figures. The rally came on the back of a well-orchestrated campaign led by Saudi Arabia and Russian Federation to enforce and extend supply curbs implemented by the Organization of Petroleum Exporting Countries and other producing nations.

Oil bulls are charging into the new year with unprecedented vigour, and the credit goes to Opec. Inventories excluding the nation's strategic reserve have declined more than 11 per cent in the previous year. EIA forecasts total US crude oil production will average 9.2 million barrels a day for all of 2017 and 10 million barrels a day in 2018, which would mark the highest annual average production, surpassing the previous record of 9.6 million barrels a day set in 1970.

"China's oil demand growth appears to be accelerating", investment bank Jefferies said.

Refinery crude runs rose by 335,000 barrels per day, EIA data showed.

Unleaded Gasoline
Daily February Unleaded Gasoline

WTI Crude Oil (Light Sweet) price at NYMEХ Stock Exchange up by 0.85% to $60.22 per barrel. "We've approached an area where we really need to see a steady diet of positive information". In 2018, investors will watch whether rising prices trigger a new flood of US output.

The effort culminated with a meeting in Vienna in November, where the group and its allies agreed to extend the cuts through the end of next year. "The expectation is the much colder than normal weather should spur demand".

However, the prices will be relatively unchanged from where they are now thanks to booming USA shale production: $59.88 per barrel in 2018, up from the $58.84 forecast in the previous Reuters monthly poll.

It also was reported that oil reserves in the USA decreased last week by 4.61 million barrels to 431.88 million barrels, while analysts forecast a decrease of 4.0 million barrels. The largest destination for US distillate exports in 2016 was Mexico, averaging 182,000 b/d, followed by Brazil (125,000 b/d) and the Netherlands (108,000 b/d).

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