OpeOluwani Akintayo
with Agency report
18 January 2018, Sweetcrude, Lagos — International benchmark Brent crude futures ended the year with a rise of almost 22%, to average about $55/b, supported by a year of ongoing supply adjustments by OPEC and non-OPEC producing countries as well as strong demand, particularly from China.
Oil futures improved markedly in 2017 to exceed $50/b, spurred by strong demand and declining global inventories.
In the Organisation of the Petroleum Exporting Countries’ newly released Monthly Oil Market Report, MOMR for December, it said the New York Mercantile Exchange West Texas Intermediate, NYMEX WTI ended 2017 gaining near 18%, despite a significant increase in oil production in the US.
These gains indicate that the global glut that has dogged the market since 2014 is shrinking.
NYMEX WTI is the most liquid commodity future in the world. So far this year the exchange-traded an average 125 MMb/d in the prompt contract alone. The NYMEX crude price is so ubiquitous that it also underpins the domestic US crude spot market.
Earlier this year, oil prices slumped on concerns that rising crude production from Nigeria, Libya and elsewhere would undermine output adjustments under the DoC.
But prices have rallied nearly 50% since the middle of the year on robust demand and strong conformity with the production reduction.
In December, oil futures improved further to levels not seen since late 2014, with ICE Brent near $67/b and NYMEX WTI around $60/b.
Both futures contracts continue to be supported by growing indications that the oil market is heading smoothly toward rebalancing, lower crude oil stocks, healthy demand and geopolitical tensions.
The positive outcome of the month-end decision between OPEC and non-OPEC producing countries to extend the Declaration to end of 2018 as well as supply turbulences in the North Sea buoyed the sustained gains in oil futures throughout the month.
Earlier in the month, crude futures prices were stable, supported by ongoing OPEC and non-OPEC production adjustments but went under pressure on profit-taking as the market eyed signs of rising US production, although prices remained close to recent two-year highs, following continued efforts by OPEC and participating non-OPEC producers to balance the market.
Subsequently, US crude futures prices slid sharply as a sizeable drop in crude oil stocks was outweighed by a sharp rise in US product inventories and US crude production hit another record high.
However, the report said, Brent crude futures prices rose following data showing higher Chinese crude imports, although gains were tempered by an increase in the US oil rig count.
The increase came despite the US dollar strengthening following a better-than-expected US jobs report for November.
Crude futures prices jumped further after the North Sea Forties pipeline was closed to repair a crack, with Brent reaching a two-and-a-half-year high.
Major oil price benchmarks were up again, impacted by the ongoing North Sea pipeline outage as well as the fall in US crude inventories.
Potentially rising oil supply dampened the upside as the International Energy Agency, IEA’s monthly report forecast that US oil production would grow more than previously expected.
Ahead of the Christmas holiday weekend, oil prices rose in light trading, steadying near their highest levels since 2015 on pledges from Saudi Arabia and Russia to extend the DoC.
Brent oil prices edged up enough to close at the highest since the summer of 2015. Oil prices surged further to two-and-a-half-year highs and US crude touched $60/b, boosted by news of an outage of a Libyan crude pipeline.
Support also came after data showed strong demand for crude imports in China and on increased US refining activity that drew more crude from inventories.
Trading was typically thin at year-end, with many traders on vacation. The EIA said crude stocks fell 4.6 mb in the last week of the year. Inventories – excluding the nation’s strategic reserve – have declined more than 11% in the last year.
US refining runs increased, pushing capacity use to 95.1%, the highest for the month of December dating back to 1998.
Refiners have profited in recent months as the spread widened between US crude and Brent futures prices.
On the final trading day of the year, US oil prices closed above $60/b, the first time since mid-2015, as the commodity ended 2017 with a 17% gain spurred by strong demand and declining global inventories.
WTI Crude Oil Price Movements 4 OPEC Monthly Oil Market Report – January 2018 prices were also supported by data from the US EIA showing domestic oil production declined to 9.75 mb/d from 9.79 mb/d the previous reading.
ICE Brent averaged December $1.23, or 2.0% higher, at $64.09/b, while NYMEX WTI increased $1.28, or 2.3% higher, to average $57.95/b. For the year, ICE Brent was $9.61, or 21.3%, higher at $54.74/b, while NYMEX WTI rose by $7.39, or 17.0%, to $50.85/b.
