Oil in Global Economy Series Too short a deal

Jan 18, 2017, 00:56

"What is interesting is the rather confident nature of the Saudi comments recently, to the point where they are questioning whether an extension of the agreed cuts is necessary". Intervals not calculated for months with sparse trading in near-the-money options contracts.

Benchmark Brent crude oil was down 23 cents a barrel at $55.22, while US light crude fell 21 cents to $52.16.

"This year, if there are no major investments coming, we may well see in a few years from now significant supply-demand gap with serious implications on the market", he said.

OIL prices slipped yesterday over doubts that large oil producers will reduce production as promised and on expectations that United States production would increase again this year.

"Clearly, a bit higher oil prices help on the revenue front, but there is a lot of ground to be made in order to close the fiscal deficit that has opened with the decline in oil prices". The kingdom is expected to grow at 2.3 per cent in 2018.

USA crude futures were trading around $53 a barrel on Tuesday, not far below 18-month highs set earlier in January, as members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries followed through on plans to cut output at the start of the year in an effort to boost prices and cut the global oversupply.

From his point of view, Dudley said BP was planning on oil prices averaged about $55 per barrel.

The agency has forecast that USA crude production will then climb to 9.3 million bpd in 2018 thanks to production gains in the Gulf of Mexico.

Prices have been stuck at levels just above $50 since the start of December, boosted there by the OPEC deal. During this time, inventory builds will slow, putting modest upward pressure on prices. "We are entering a period of greater oil-price volatility".

"Right now, the USA is an important swing producer for global energy market that is entirely in the control of the market and prices".

Reports that key crude exporters, including Saudi Arabia and Russian Federation, were cutting production to reduce global crude glut, and forecasts of record demand in China are push factors for oil prices to rise higher in the near term.

"I expect the US shale oil will go back to increasing production this year", Birol said. Forecast production in 2017 is 0.2 million b/d higher than in the previous forecasts, reflecting higher drilling activity, drilling efficiency, and well-level productivity than in previously assumed.

A lack of investment in new sources of oil could also set the market up for price shocks by the end of the decade. Output is projected to increase to 9.3 million barrels a day for 2018.

"This will not be filled by shale oil; this is why we may now be entering an era of greater oil volatility".

EIA estimates global petroleum and other liquids production will increase through the forecast.

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