Published: Mon, January 01, 2018
Finance | By Gustavo Carr

Supply discipline and demand to prop up oil prices in 2018

Supply discipline and demand to prop up oil prices in 2018

However, the strong close outs of the year herald what many experts say is the inevitable outcome of high prices: increased US production in 2018, which will clash directly with the Organization of the Petroleum Exporting Countries' (OPEC) ongoing attempt via its extended output cutbacks to rebalance the market.

The US Energy Department said crude stocks fell 4.6 million barrels in the latest week.

The U.S. shipped out 1.21 million barrels of crude a day in the fourth week of December, roughly twice what it did a year earlier, show Energy Information Administration figures released Thursday.

Countering those cutbacks, U.S. oil production has soared more than 16% since mid-2016 and is approaching 10 million bpd, trailing only OPEC kingpin Saudi Arabia and Russian Federation.

United States exports to Asia have already increased with higher Middle East oil prices because of the OPEC-led output cuts and a wide WTI-Brent spread.

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"The key driver for the oil market this year has been that the OPEC and Russian production cuts were introduced, complied with and extended", said Ric Spooner, a Sydney-based analyst at CMC Markets. Inventories excluding the nation's strategic reserve have declined more than 11% in the previous year.

West Texas Intermediate crude futures were at $60.21 a barrel, up 37 cents or 0.6% from their last close, after hitting a June 2015 high of $60.32 earlier in the day.

The price for March Futures Brent oil grew by 0,67% to stand at $66,60 per barrel on the London ICE Futures Exchange.

In the most recent week, USA production dipped modestly to 9.75 million bpd from 9.79 mln bpd the previous week. The cuts started last January and are scheduled to cover all of 2018. Meanwhile, Brent is set to continue rising amid a weekslong shutdown of a key pipeline network in the North Sea, according to S&P Global Platts.

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