Markets

OPEC's cheer over 2018 oil rally tinged by shale worries

OPEC's cheer over 2018 oil rally tinged by shale worries

U.S. crude stockpiles at the Cushing, Oklahoma, pipeline hub probably fell by 1.5 million barrels last week, according to a forecast compiled by Bloomberg.

Brent crude futures were at $67.77 a barrel, up 15c or 0.2% from their last close.

Analysts say U.S. output may have levelled off over the holidays. Output curbs by the Opec and allied suppliers have buoyed prices, with producers promising to continue the curbs for all of 2018.

Late Tuesday, trade group the American Petroleum Institute will release figures on domestic petroleum supplies, followed by Wednesday's EIA figures.

Crude oil prices fell Friday, dropping from highs last seen in 2015, as soaring USA production undermined a 10% rally from December lows that were driven by tightening supply and political tensions in OPEC member Iran, Reuters reported.

Oil prices closed at fresh three-year highs Tuesday, as geopolitical risk and confidence in global growth continued to buoy markets. 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 oil demand growth to outpace non-OPEC supply growth in both 2018 and 2019", Standard Chartered analysts said in a note.

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

Traders said the gains were due to a slight decline in the number of U.S. rigs drilling for new production, which eased by five in the week to January 5, to 742, according to data from oil services firm Baker Hughes. Only Russia and Saudi Arabia produce more.

The report also noted that the North Sea Brent barrel stands at $64 per barrel, which is the highest it has been since November 2014, the start of the oil price crisis.

Traders said political tensions in Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, had pushed prices higher.

Despite this, USA production is expected soon to rise above 10 million barrels per day, largely thanks to soaring output from shale drillers.

However, some analysts believe market participants are getting to optimistic, especially given expectations for an increase in USA shale production. "But for now, the bullish trend remains intact as prices remain above key supports".


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