Oil at highest since 2015 on inventory drawdown, Iran unrest

  • Oil at highest since 2015 on inventory drawdown, Iran unrest

Oil at highest since 2015 on inventory drawdown, Iran unrest

OPEC, supported by Russian Federation and other non-members, begun to hammer out a deal to cut supplies again in 2016, aiming to lift prices by removing a glut built up in the previous two years.

A Reuters survey showing that the Organization of the Petroleum Exporting Countries' (OPEC) compliance with its crude output reduction deal rose to 128 percent in December - but even though this is precisely what analysts insisted needed to happen in order for global supply-demand ratio to return to a healthy balance, they now worry that inventories will be too low later this year. But prices have rallied almost 50 percent since the middle of the year on robust demand and strong compliance with the production limits. US production rose to 9.78 million barrels in the last week.

Brent crude, the worldwide benchmark, settled up 23 cents at $68.07 a barrel after hitting a high of $68.27 earlier in the session. Brent broke through $67 this week for the first time since May 2015.

Norbert Rucker, analyst for Julius Baer, said crude prices above $60 project an "overly rosy picture" and explained that "Oil production disruptions (in Iran) remain a very distant threat.Disruptions in the North Sea have been removed with the Forties Pipeline system having resumed full operations; USA oil production surpassed the 2015 highs in October and is set to climb to historic highs this year". US refiners boosted operating rates for a third straight week, contributing to the decline in stored oil supplies.

The agency said USA crude oil production increased in 2017 by more than 384,000 barrels per day (BPD), to 9.2 million barrels per day (MMBPD), based on data through September and estimates for the remainder of 2017.

Ras Tanura refinery in January 2017
Crude prices slightly rise

Extreme cold weather across much of North America could also boost USA crude prices by causing production problems in the oilfields.

WTI Crude Oil has indicated a break above the weekly resistance at 59-60, and while that holds, it could well move up to 64.

The bearish factors were mainly: the U.S. crude oil production growth threat, the rise in United States gasoline and distillate stocks, the pipeline disruptions in the North Sea and Libya being resolved, the end of the holiday demand surge combined with the cold snap in the USA hampering transportation fuels demand, and the USA oil rig count remained strong.

Libya is to start repairing the pipeline near the Es Sider terminal this weekend, a Libyan oil official said, while the Forties pipeline was already pumping close to normal levels, according to trading sources.