Don't Expect OPEC's Oil Deal To Fall Apart in 2018

Alicia Cross
January 10, 2018

According to Iran's oil ministry news service Shana, Bijan Namdar Zanganeh said "members of the Organization of the Petroleum Exporting Countries (OPEC) are not keen on increased Brent Crude prices to above 60 dollars per barrels because of shale oil".

Brent for March settlement climbed 16 cents to end the session at $67.78 a barrel on the London-based ICE Futures Europe exchange. U.S. West Texas Intermediate crude (WTI) gained 36 cents to $62.09 and reached its highest since May 2015 as well at $62.56.

OPEC has no formal target for oil prices. Inventories at Cushing dipped below 50 million barrels through the week ended 29 December, the first time they have dropped below that level since February 2015, according to the most recent Energy Information Administration data. "We expect to see growth near 2 million barrels per day in 2018 and 1.3 million barrels per day in 2019". The API releases its data on Tuesday at 4:30 p.m. EST and the government report is scheduled for Wednesday at 10:30 a.m.

"Production cuts and demand are continuing to rebalance the market".

Yet, surging USA production could offset some of the cuts from OPEC producers, as US production rose to 9.78 million barrels a day (MMBPD) in the latest week, according to last Wednesday's report.

There is no sign yet that OPEC is prepared to relax its supply restraint.

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USA crude production was forecast to climb by 970,000 barrels per day (bpd) in 2018 and rise another 580,000 bpd to 10.85 million bpd in 2019, the EIA said in a monthly report that provided the agency's first outlook for next year.

USA oil and gas production will continue to increase in 2019 as well, to the chagrin of OPEC and Russia-major exporters looking to curb production and reduce competition from American shippers.

Even so, US production is expected soon to rise above 10 million barrels per day, close to Saudi levels, due largely to soaring output from shale drillers, government data shows.

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However, Innes added that Middle East turmoil would remain a key focus for oil markets and had the potential to "send oil prices rocketing higher".

Saudi Arabian Oil set to appoint banks, including Goldman Sachs Group Inc. and Citigroup Inc., to help manage its initial public offering, people familiar with the matter said, as the state-owned crude producer pushes ahead with what could be the world's largest share sale.

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