OIL PRICE: ABOVE $61 YET
REUTERS, BLOOMBERG - Oil markets were firm on Friday, supported by OPEC-led supply cuts which are tightening the market as well as by strong demand, but analysts cautioned that the cuts would need to be extended to counter rising U.S. output.
Brent futures LCOc1 were at $60.75 per barrel at 0739 GMT, up 13 cents, or 0.2 percent, from their last close. Brent has risen by around 37 percent since its low in 2017 reached last June.
U.S. West Texas Intermediate (WTI) crude CLc1 was at $54.70 a barrel, up 16 cents, or 0.3 percent, from the last close. WTI is around 30 percent above its 2017-low in June.
Physical oil prices are also rising. Saudi Aramco has raised the December official selling price (OSP) for its Arab Light grade for Asian customers by 65 cents a barrel from November to a premium of $1.25 a barrel to the average of the Oman and Dubai benchmarks. That is the highest since September 2014.
Futures prices are rising in part because of the decision by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, to hold back 1.8 million barrels per day (bpd) in production to tighten markets.
While supplies are being withheld, demand is rising, especially in China, whose roughly 9 million bpd of imports have surpassed the United States as the world's biggest crude importer.
"China's oil demand growth appears to be accelerating," investment bank Jefferies said.
Furthermore, crude inventories have dropped as markets have been slightly undersupplied during the past quarters.
However, the outlook for next year is uncertain.
"We are bearish on Brent in the near term given bullish speculative positioning moving ahead of expected weaker fundamentals in late 2017 and Q118," BMI Research said.
The pact to cut supply runs to March 2018. While there is growing consensus to extend the deal to cover all of 2018, an agreement has yet to be made.
Analysts say that without an extension of the cuts, a supply glut could re-emerge.
"Our oil balance numbers imply a modest global drawdown of inventories in 2017, not nearly enough to reverse the large builds seen from 2014 to 2016. What's more, our balance points to the resumption of global stock builds in 2018," said Harry Tchilinguirian of BNP Paribas.
Tchilinguirian said rising U.S. output, which is up more than 13 percent since the middle of 2016 to 9.6 million bpd C-OUT-T-EIA, was resulting in increased exports.
The Energy Information Administration said this week that the latest U.S. crude export figure rose to a record 2.1 million bpd.
"With the U.S. oil surplus increasingly exported... it may be difficult for Brent to hold on to $60 per barrel in 2018," Tchilinguirian said, adding that he expected WTI and Brent to average $50 per barrel and $55 per barrel, respectively, in 2018.
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U.S. EIA - Energy companies’ free cash flow—the difference between cash from operations and capital expenditure—was $119 billion for the four quarters ending June 30, 2018, the largest four-quarter sum during 2013–18 Companies reduced debt for seven consecutive quarters, contributing to the lowest long-term debt-to-equity ratio since third-quarter 2014
OPEC - Total oil demand for 2018 is now estimated at 98.82 mb/d. In 2019, world oil demand growth is forecast to rise by 1.41 mb/d. Total world oil demand in 2019 is now projected to surpass 100 mb/d for the first time and reach 100.23 mb/d.
ARAB NEWS - Oil exports from southern Iraq are heading for a record high this month, two industry sources said, adding to signs that OPEC’s second-largest producer is following through on a deal to raise supply and local unrest is not affecting shipments.
PLATTS - The International Energy Agency expects the US to account for 75% of the global growth in natural gas exports over the next five years, a bullish outlook for LNG developers facing challenges at home getting projects off the ground and abroad with tariffs affecting trade flows.