Crude Oil Price Analysis for January 15, 2018

  • Crude Oil Price Analysis for January 15, 2018

Crude Oil Price Analysis for January 15, 2018

According to the Q4 Dallas Fed Energy Survey published at end-December, 42 percent of executives at 132 oil and gas firms expect the US oil rig count to substantially increase if WTI prices are between $61 and $65 a barrel.

Oil prices are now at levels at which USA production could substantially increase. In particular, USA crude oil production is expected to increase more quickly than any other country.

The EIA also estimates that the difference between total world consumption and total world production averaged 400,000 barrels per day in 2017, marking the first year of global inventory draws since 2013. These levels of USA crude oil output are expected to continue increasing in 2019 to an average of 10.8 million b/d. "Supply disruptions and falling USA and global inventories have driven crude oil higher", said Ole Hansen, head of commodity strategy at Saxo Bank in a note.

The EIA revised its production growth forecast for 2018 sharply higher to 970,000 bpd from 780,000 bpd in its previous outlook.

Iranian Oil Minister Bijan Zangeneh said Tuesday that prices this year were supported in part by OPEC commitments, but also by demand strains from severe winter weather.

WTI light sweet crude oil rose 60 cents to $63.64 a barrel this morning, the highest in more than three years.

Global consumption of petroleum and other liquid fuels grew by 1.4 million b/d in 2017, reaching an average of 98.4 million b/d for the year.

At 96.7% of capacity the week ending December 29, the utilization rate was higher than at any point in 2017, topping 96.6% mark from late August.

At the time, political opposition to then-president Hugo Chavez organized the industrial action to force a new presidential election, resulting in the shuttering of all but 0.6 MMBPD of crude oil production. That was slightly below the five-year average of just over 420 million barrels, the target for OPEC and others cutting output.

Though production hasn't been impacted, the protests are widely viewed as reason enough for U.S. President Donald Trump to go against the principles of the Joint Comprehensive Plan of Action - the United Nations -backed Iranian nuclear deal - and decide Friday to re-impose oil-related sanctions on Iran. Apart from greater domestic production, cargoes were even heard to be headed to the US from overseas. Also, the dollar fell in a broad sell-off after a report that China was ready to slow or halt its US treasury purchases.

Bearish signals include a rise in fuel inventories as well as a fall in refined products profits in Asia, which are expected to hamper orders for new feedstock crude.