Oil retreats from $70 ceiling on fading geopolitical risk premium

Lloyd Doyle
January 13, 2018

As oil prices marched up to three-year highs today, U.S. stockpile data somewhat dampened the black stuff's momentum. With crude trading near a three-year high, here's a look at how investors have increased their thirst for oil.

USA crude inventories fell 4.9 million barrels last week, more than the 3.9-million decline forecast, but bigger-than-expected builds in gasoline and fuel stocks offset that drawdown, the Energy Information Administration reported.

That's even with a 2.4% rise in global demand this year and 1.7% in 2019, according to the EIA.

Federal U.S. estimates show total crude oil production hit 9.78 million barrels per day in the week ending December 15, a record high that Craig said was out of reach because of the recent U.S. cold snap.

Brent crude futures LCOc1 traded 20 cents lower at $69.06 a barrel at 1129 GMT.

The relative strength index (RSI), which measures the speed and breadth of a rally, shows oil in an overbought condition, suggesting the move has come too far, too fast.

In Asia's Singapore oil trading hub, average refinery profit margins have fallen below $6 a barrel, their lowest seasonal level in five years.


Oil prices rose for a sixth day on Friday after Russia's oil minister said that global crude supplies were "not balanced yet", alleviating market concerns about a wind-down of the OPEC-led deal to reduce production.

More immediate price support came overnight from the United states, where crude inventories fell nearly 5 million barrels in the week to January 5, to 419.5 million barrels.

The market was supported by OPEC-led production cuts and expectations that USA crude inventories have dropped for an eighth week.

"EIA estimates that Opec countries cut crude oil production output in 2017, but those cuts were offset by increased production in non-OPEC countries, especially the United States and Canada", John Conti, EIA acting administrator, said in a statement.

Meanwhile, US production is showing signs of levelling after after huge shale oil output in the past two years. The EIA anticipates OPEC production to increase by 500,000 b/d in 2019 as it slowly returns to pre-agreement levels. Part of the reason is that demand for diesel, a similar fuel, is increasing. Average WTI crude oil prices are forecast to stay between $4/b and $5/b lower than Brent prices in both 2018 and 2019, falling from the $6/b average price difference seen in the fourth quarter of 2017.

USA crude production is forecast to average 10.3 million bpd in 2018, which would be the highest annual average US production, surpassing a previous record of 9.6 million bpd in 1970.

Other reports by Iphone Fresh

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