Oil prices rose in the first trading hours of 2017, buoyed by hopes that a…
Oil prices slip back; traders await OPEC report
Crude futures slipped on Monday as investors booked profits ahead of a key data that would indicate the progress of an ongoing multi-country effort to cut back oil production.
“Traders will be keenly awaiting the release today of the Organization of the Petroleum Exporting Countries monthly report. If production cuts are coming through as suggested, we should see oil prices push higher,” said ANZ Research.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in March CLH7, -0.84% traded at $53.77 a barrel, down $0.09 in the Globex electronic session. April Brent crude LCOJ7, -0.85% on London’s ICE Futures exchange fell $0.06 to $56.64 a barrel.
Oil prices rose nearly 2% over the weekend after the Paris-based International Energy Agency said global crude supply dropped nearly 1.5 million barrels a day in January, and 730,000 barrels a day less from the same month last year, with both OPEC and non-OPEC countries producing less.
The nearly one million-barrel decline by OPEC, if confirmed later today by the cartel, would mean a 90% compliance to the production cut pact, IEA said, estimating the cartel’s last month production fell to 32.06 million barrels a day.
OPEC on Nov. 30 had agreed to cut production from January by 1.2 million barrels a day to end a persistent oil glut. Later in December, Russia and other producers outside the group committed to taking 558,000 barrels a day out of the market. The combined cuts would wipe out around 2% of the world’s daily production.
“We estimate there could be over 400,000 barrels of inventory draws in 2017 if agreed cuts are complied with during first half of 2017, draining excess inventories back to normalised levels,” Bernstein Research said in a note.
However, burgeoning production from other non-cartel players could impede the rate of decline. Collective production from Brazil, Canada, and U.S. is expected to grow by 750,000 barrels a day in 2017 and the net change for non-OPEC producers next year is close to a growth of 400,000 barrel a day, the IEA said.
Analysts said that even though the pace of growth in U.S. production is currently not fast enough to offset the decline rate elsewhere, a rapid improvement in drilling technology and increased investment in innovation means production from the U.S. remains a threat that could derail OPEC’s plan to move the market into a deficit.
American oil drillers activated eight more oil rigs in the week ended February 10, bringing the total U.S. count to 591, the highest number since October 2015, oil-field service company Baker Hughes said on Friday.
Nymex reformulated gasoline blendstock for March RBH7, -1.38% — the benchmark gasoline contract — fell 60 points to $1.5836 a gallon, while March diesel traded at $1.6691, 32 points higher.
ICE Gasoil for March changed hands at $503.25 a metric tonne, down $0.25 from Friday’s settlement.