Oil prices close 2017 at 2½-year high above $60

MarketWatch

Natural-gas futures fall 21% in 2017, but 11% weekly surge helps cap uglier fall

Reuters
Record-breaking snow in Erie, Pennsylvania seen in late December 2017

By

MARKDECAMBRE

BARBARAKOLLMEYER

MARKETS REPORTER

Crude-oil futures ended Friday trade on a decidedly upbeat note, settling above $60 for the first time in more than two years to wrap up 2017.

West Texas Intermediate crude on the New York Mercantile Exchange CLG8, +0.43% finished up 1%, or 58 cents, to $60.42 a barrel. That represents its first close above $60 since June 23, 2015, according WSJ Market Data Group. U.S. benchmark oil is up 12.5% in 2017, nearly 17% this quarter, 5.3% for the month, and 3.3% this week.

March Brent LCOH8, +0.70%  rose 71 cents, or 1.1%, to $66.87 a barrel. The international benchmark for crude has gained 18% this year, more than 16% over the last three months of the year, 5.2% for the month, and 0.6% for the week.

The market has improved amid optimism about years of oversupply finally ebbing, capped by rising demand and the production-limit deal, led by the Organization of the Petroleum Exporting Countries, being extended through 2018. Both oil contracts rallied to end at 2½-year highs.

Moves for crude prices came as Baker Hughes on Friday reported a small drop in rig counts for the week, with rigs drilling for gas down by two to 182, while those drilling for oil remained unchanged at 747. Over the year, however, total rigs have climbed by 271 to a total rig count at 929.

On Thursday, the market took cues from inventory reports that showed a steady decline in U.S. crude stocks. The U.S. Energy Information Administration reported that domestic-crude supplies fell by 4.6 million barrels for the week ended Dec. 22, compared with a 6-million-barrel drawdown reported by the American Petroleum Institute late Wednesday.

Meanwhile, natural gas NGG18, +1.41%  for February jumped 3.9 cents, or 1.3%, to settle at $2.9530 per million British thermal units, after surging 6.4% on Thursday, posting the biggest daily rise since Dec. 21, 2016, according to FactSet. Natural-gas futures, however, have declined 21% in 2017, retreated 1.8% on the quarter, fell 2.4% on the month, but an 11% surge this week, amid freezing weather, helped mitigate more brutal losses.

January heating oil HOF8, +0.89% rose by about 2.34 cents, or 1.1%, to $2.0755 a gallon, marking a fresh 52-week high and the highest settlement since Feb. 27, 2015. Futures have gained 22% this year, about 15% this quarter, 10% in December, and 5.4% gain on the week.

Arctic cold air has been chilling portions of the U.S., with forecasts calling for a continuation of that weather into the first week of January. Record-cold levels were set in Minnesota and Michigan on Thursday, according to The Weather Channel. Cold weather could support further buying of natural gas and heating oil.

January gasoline RBF8, -0.06% rose 0.62 cent, or 0.4%, to $1.7992 a gallon. Gasoline futures are up 8.1% in 2017, 12% over the past three months, 4.1% on the month, with a 2.1% advance this week.

— Biman Mukherji contributed to this article

Venezuela oil-backed cryptocurrency to launch in days, government says

CNBC

  • Venezuela’s cryptocurrency will launch within days and be backed by 5.3 billion barrels of oil worth $267 billion
  • The launch is a bid to offset a deep financial crisis, the socialist government said on Thursday
  • President Nicolas Maduro surprised many earlier this month when he announced the “petro” cryptocurrency

Venezuela's President Nicolas Maduro (C) gestures as he speaks during a rally supporting him and opposing U.S. President Donald Trump, in Caracas, on August 14, 2017.

Carlos Becerra | Anadolu Agency | Getty Images
Venezuela’s President Nicolas Maduro (C) gestures as he speaks during a rally supporting him and opposing U.S. President Donald Trump, in Caracas, on August 14, 2017.

Venezuela’s cryptocurrency will launch within days and be backed by 5.3 billion barrels of oil worth $267 billion, in a bid to offset a deep financial crisis, the socialist government said on Thursday.

President Nicolas Maduro surprised many earlier this month when he announced the “petro” cryptocurrency, to be backed by OPEC member Venezuela’s oil, gas, gold and diamond reserves.

Despite the skepticism of cryptocurrency experts who do not think Venezuela has the wherewithal to pull it off, communications minister Jorge Rodriguez said the first petro offering would come within days.

“Camp one of the Ayacucho block will form the initial backing of this cryptocurrency,” Rodriguez told reporters, referring to part of Venezuela’s southern Orinoco Belt.

“It contains 5.342 billion certified barrels of oil. We’re talking about backing of $267 billion,” said Rodriguez, adding that that differentiated the petro from other cryptocurrencies such as Bitcoin.

Miners were already lined up, he said, without giving more details. Cryptocurrencies are obtained by users setting up computers to do complex mathematical calculations in a process known as mining.

Cryptocurrencies are decentralized and their success relies on transparency, clear rules and equal treatment of all involved. Venezuela gave no technical details about the petro.

The government appears to be hoping the petro will offset a collapse in Venezuela’s currency – 97 percent in one year against the U.S. dollar on the black market – and isolate the country from the U.S. dollar and Washington.

Rodriguez also hopes to use the petro as part of a mechanism to pay international providers, many of whom have stopped supplying to Venezuela given its inability to pay its debts.

With Venezuela’s 30 million people suffering shortages, runaway prices and a fourth year of recession, Maduro has long blamed the U.S. government for an “economic war” against it. Critics say incompetent policies are to blame for Venezuela’s economic mess.

Earlier on Thursday, Maduro blamed U.S. pressure on Portugal for blocking imports of pork leading to a shortage over Christmas in Venezuela.

U.S. President Donald Trump’s administration has imposed various political and financial sanctions on Maduro’s government, accusing senior officials of rights abuses and corruption.

“It will be materially impossible for the dictatorial financial centers of the world to intervene against this initiative,” said Rodriguez, citing the Portugal case.

“It will allow us to overcome any financial blockade.”

Cryptocurrencies have grabbed global attention partly because of the remarkable rise in the price of Bitcoin, making millionaires of many early investors, including some in Venezuela who used Bitcoin and other cryptocurrencies to shield themselves from strict foreign exchange controls which economists blame for the crisis.

Oil near mid-2015 highs on strong China data, tighter 2018 outlook

CNBC

  • Brent, WTI crude both near mid-2015 highs
  • Strong China import quota, lower inventories lift crude
  • OPEC, Russia-led supply cuts also prop up prices
  • Soaring U.S. oil output undermines efforts to cut supplies

Oil fracking California

Getty Images

Oil prices rose on Thursday, lifted by strong data from top importer China amid thin trading activity ahead of the New Year weekend.

Heading into 2018, traders said market conditions were relatively tight due to ongoing supply cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC), as well as top producer Russia.

U.S. West Texas Intermediate (WTI) crude futures were at $59.82 a barrel at 0744 GMT, up 18 cents or 0.3 percent from their last settlement. WTI broke through $60 a barrel earlier this week, the first time since June 2015.

WTI received support from a report by the American Petroleum Institute (API) showing a 6 million barrel drop in crude oil inventories to 432.8 million.

Brent crude futures were at $66.68 a barrel, up 24 cents or 0.4 percent. Brent broke through $67 earlier this week, the first time since May 2015 this week.

Amid strong global demand and rising investor interest, trading in crude derivatives is booming, with annual Brent and spot WTI volumes hitting a new record in 2017.

Top oil analyst discusses 2018 outlook for crude, as well as his top picks in the space

Top oil analyst discusses 2018 outlook for crude, as well as his top picks in the space  

Traders said the higher prices came after China released strong import quotas for 2018, which could lead to another record for purchases by the world’s biggest importer.

China’s oil thirst has also led to a 3 percent monthly drawdown in its crude inventories in November, to 26.15 million tonnes, the lowest level in seven years, according to Xinhua data on Thursday.

Oil markets have also been tightened following a year of OPEC and Russia-led production cuts, which were started last January and scheduled to cover all of 2018.

Pipeline outages in Libya and the North Sea have also been supporting oil prices.

“Given the much stronger price response to supply disruptions in the wake of OPEC supply cuts, the market is poised to make further gains,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda.

“With geopolitical risk no less sure ahead of Libyan elections next year, we should expect more regional chaos and disorder to underpin oil prices,” he added.

Around 100,000 barrels per day (bpd) in oil supplies were disrupted in Libya this week after an attack on a pipeline.

In the North Sea, the 450,000 bpd capacity Forties pipeline system was shut earlier this month due to a crack.

Both pipelines are expected to return to normal operations in January, with Forties already in start-up process.

Countering efforts by OPEC and Russia efforts to prop up prices is U.S. oil production, which has soared more than 16 percent since mid-2016 and is fast approaching 10 million bpd.

Only OPEC king-pin Saudi Arabia and Russia produce more. The latest official U.S. production figures are due to be published by the on Thursday.

Oil prices slip away from 2015 highs, but market remains tight

CNBC

  • Oil prices on Wednesday slipped from a two-and-a-half year high hit the previous session
  • Gradual resumption on the Forties pipeline is helping ease pressure after an attack on a Libyan pipeline

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Oil prices on Wednesday slipped away from two-and-a-half year highs hit the previous session as the gradual resumption of flows through a major North Sea pipeline made up for supply disruption in Libya.

But the two outages in quick succession have highlighted how much tighter global oil markets have become a year into supply cuts led by OPEC and Russia.

At 0210 GMT U.S. West Texas Intermediate (WTI) crude futures were at $59.74 a barrel, down 23 cents from their last settlement. WTI broke through $60 a barrel for the first time since June 2015 in the previous session.

Brent crude futures were at $66.66 a barrel, down 36 cents. Brent broke through $67 for the first time since May 2015 the previous day.

The dips were a result of the gradual return of the 450,000 barrels per day (bpd) capacity Forties pipeline system in the North Sea. Flows through Forties will return to normal early in the New Year, operator Ineos said on Tuesday.

The gradual Forties resumption is helping ease pressure after an attack on a Libyan pipeline led to the outage of almost 100,000 bpd of supply.

2018 to be a flat year for oil: Gina Sanchez  

Price pressure also rose after Saudi Arabia released its 2018 state budget on Tuesday, the largest in the kingdom’s history, which was seen as an indicator that the world’s biggest crude exporter would require higher oil prices in order to meet its financial needs.

“The Saudi budget and Libyan attack on a pipeline have driven prices sharply higher,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Both the Forties and Libyan outages, which together amount to around 500,000 bpd, are small in a global context where both production and demand are approaching 100 million bpd.

But the disruptions highlight the fact that markets have tightened significantly a year into voluntary supply restraint led by top producer Russia and the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC).

Data from the U.S. Energy Information Administration (EIA) shows that following rampant oversupply in 2015, global oil markets gradually came into balance by 2016 and started to show a slight supply deficit this year, resulting in a reduction of global fuel inventories.

EIA data implies a slight supply shortfall of 180,000 bpd for the firstquarter of 2018.

OPEC and Russia started withholding production last January, and the current schedule is to continue cutting throughout 2018.

A major factor countering efforts by OPEC and Russia efforts to prop up prices is U.S. oil production, which has soared more than 16 percent since mid-2016 and is fast approaching 10 million bpd.

Only OPEC king-pin Saudi Arabia and Russia produce more.

The latest U.S. production figures are due to be published by the EIA on Thursday.

Oil price optimism would be ‘misplaced’ in early 2018, strategists say

CNBC

There’s little reason to expect oil prices to extend gains through the first quarter of 2018, energy strategists have told CNBC.

The prospect of rising U.S. shale production, subdued price movements and intensifying geopolitical risks is likely to offset a rally in prices at the start of next year, the analysts said.

Harry Colvin, director and senior economist at Longview Economics, told CNBC in a phone interview that he was “pretty bearish” over the price of oil over the next three months.

“While we could easily see an escalation of tensions in the Middle East, in the absence of that, optimism is probably misplaced for up to six months… Everybody seems to be facing the same way over oil at the minute and it’s when this happens that you need to be especially careful,” he said.

Oil prices have recovered well over a third of their value since hitting 2017 lows in June. The gains are largely due to the global supply cuts implemented by OPEC and non-OPEC producers at the start of the year.

What will happen with US shale?

Goldman Sachs said a stronger-than-anticipated OPEC-led commitment to extend production cuts would likely support oil prices through 2018. The U.S. bank lifted its Brent price forecast for next year to $62 a barrel and its West Texas Intermediate (WTI) projection to $57.50 a barrel. The revisions were up from $58 a barrel and $55 a barrel respectively.

The U.S. Energy Information Administration (EIA) and the International Energy Agency (IEA) have both indicated strong global demand growth in 2018 at 1.3 percent or above.

“A really key nub of the debate with oil is what will happen with the U.S. shale?” Colvin said.

Pump jacks and wells on the Monterey Shale formation in California

David McNew / Stringer | Getty Images News
Pump jacks and wells on the Monterey Shale formation in California

In recent months, U.S. shale producers have surprised market participants with how quickly they have ramped up production in the wake of rising prices. Almost all increases in American oil production over the last few years have stemmed from shale, which in total accounts for nearly two-thirds of the country’s existing output.

The U.S. is not part of a global effort to withhold oil production levels.

Colvin said it would be “easy” for oil to go to $50 a barrel by the end of the first quarter, before adding he would “not be surprised” to see levels as low as $45 a barrel.

‘Volatility killer’

OPEC, Russia and nine other producers agreed to extend their deal to keep 1.8 million barrels a day off the market through the end of 2018. Having extended the deal once already, the producers again reached an agreement at the end of November to try to drain a global crude glut.

OPEC’s latest deal was most likely a “volatility killer,” Chris Main, energy strategist at Citi, told CNBC in a phone interview.

Despite expecting fundamentals to continue to support the market, Main said he forecast oil prices to fall back to around $57 a barrel by the end of the first quarter.

“That price weakness could end up being supportive to the OPEC commitment next year… It would certainly reinforce the will of the Saudis,” he said.

OPEC kingpin Saudi Arabia is head of the cartel’s compliance monitoring committee and is reportedly expected to try to ensure all other member countries stick to agreed production levels over the next 12 months.

‘Bullish catalysts in short supply’

“The major price driver in the first quarter of 2018 will be geopolitical developments,” Stephen Brennock, oil analyst at PVM Oil Associates, said in an email to CNBC.

While Brennock cited Iran’s relationship with the U.S. and Saudi Arabia as geopolitical risks worthy of keeping an eye on, he argued it was likely to be only a “matter of time” before Venezuela‘s worsening debt crisis started to significantly hamper the OPEC members’ oil production.

An attendant sits at a closed Petroleos de Venezuela SA (PDVSA) gas station in Caracas, Venezuela, on Friday, Sept. 22, 2017.

Wil Riera | Bloomberg | Getty Images
An attendant sits at a closed Petroleos de Venezuela SA (PDVSA) gas station in Caracas, Venezuela, on Friday, Sept. 22, 2017.

The South American country has the largest proven oil reserves in the world but, amid intensifying economic pressure, its production levelshave decreased to levels not seen in more than 30 years.

“All things considered, bullish catalysts will be in short supply and prices will therefore settle into their current trading ranges,” Brennock said.

The price of oil collapsed from almost $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production. OPEC’s reluctance to cut output was also seen as a key reason behind the fall. But, the oil cartel soon moved to curb production — along with other oil producing nations — in late 2016.

Oil trades roughly flat in thin volume ahead of Christmas holiday weekend

CNBC

  • OPEC-led production cuts are still supporting the market.
  • Traders started closing positions ahead of the Christmas and New Year holidays.
  • Climbing U.S. output will weigh on oil markets in 2018 and 2019, Rystad said.

Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Oil prices traded roughly flat in light volumes on Friday, staying near their highest levels since 2015 on pledges from OPEC leader Saudi Arabia and non-OPEC Russia that any exit from crude output cuts would be gradual.

U.S. West Texas Intermediate (WTI) crude futures ended Friday’s session 11 cents higher at $58.47.

Brent crude futures, the international benchmark for oil prices, ended the session up 35 cents at $65.25 a barrel, its highest close since June 2015.

Both contracts settled one hour early due to the upcoming Christmas holiday. Market liquidity was also drying up on Friday as traders closed positions ahead of the Christmas and New Year breaks.

About 280,000 front-month U.S. crude futures changed hands while front-month Brent crude futures saw the lowest trade volumes in about seven months, excluding expiration days.

Saudi Arabia has to be ‘absolutely delighted’ with the oil market  

An earlier dip on Friday was due to an outlook for rising supplies that triggered those holding long positions to sell-out ahead of the year-end holidays, traders said.

Also weighing on the market was the expected return of the 450,000 barrels per day (bpd) Forties pipeline system in the North Sea in January.

The pipeline, which delivers crude underpinning Brent futures, was shut earlier this month due to a crack. Operator Ineos said on Thursday it expected to complete repairs around Christmas and to gradually restart the system in early January.

Oil prices have recovered in the past year on the back of oil production cuts by OPEC, Russia and other producers, helping reduce the global inventory overhang.

Russian Energy Minister Alexander Novak told Reuters OPEC and Russia would exit cuts smoothly, possibly extending curbs in some form to avoid creating any new surplus.

“There is a consensus among the (oil) ministers that we should avoid oversupply on the market when exiting the deal,” Novak said, comments that will calm investor worries that Moscow wants a speedy exit.

Saudi Energy Minister Khalid al-Falih said it was premature to discuss changes to the pact on supply cuts as market rebalancing was unlikely to happen until the second half of 2018.

Commodities tomorrow:

Commodities tomorrow: Crude oil trades higher  

The OPEC-led pact to withhold supplies started in January this year. The producer group and its allies agreed to extend the cuts cover all of 2018 from their March expiry. The supply restraint has reduced oil inventories and helped push up Brent by more than 45 percent since June this year.

“OPEC’s extension of its production cuts through the end of 2018 is a necessary condition for continued inventory drawdown,” U.S. investment bank Jefferies said.

Jefferies said it has raised its 2018 Brent forecast to $63 a barrel from $57, and its WTI forecast to $59 per barrel from $54, on expectations that the market will remain tight.

Novak said some pressure on prices was possible in the first quarter of 2018 when demand traditionally declines and added he saw prices hovering at around $50 to $60 in 2018.

Analysts said crude output in the United States, fast approaching 10 million bpd, would be a drag on prices in the longer term.

“Supply is expected to grow further, paving the way to an oversupplied market, which can again exercise downward pressure on oil prices,” consultancy Rystad Energy said.

Oil dips away from 2015 highs as rising US output weighs on outlook

CNBC

  • Oil prices dipped away from 2015 highs reached the last session
  • Dealt volumes of crude futures were declining fast as traders closed positions ahead of upcoming Christmas and New Year breaks

Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Oil prices on Friday dipped away from 2015 highs reached the previous session, weighed down by rising U.S. output and the expected January re-opening of the Forties pipeline in the North Sea.

Dealt volumes of crude futures were declining fast as traders closed positions ahead of upcoming Christmas and New Year breaks.

U.S. West Texas Intermediate (WTI) crude futures were at $58.15 a barrel at 0130 GMT, down 21 cents, or 0.4 percent, from their last settlement.

Brent crude futures, the international benchmark for oil prices, were at $64.64 a barrel, down 26 cents, or 0.3 percent.

Brent on Thursday closed at $64.90 a barrel, its highest since June, 2015.

The dip on Friday was largely due to an outlook for rising supplies which triggered traders to sell out of long positions ahead of year-end.

Jeffrey Halley, senior market analyst at futures brokerage Oanda in Singapore said there was “a lack of momentum as the holiday season subdues trading volumes”.

Saudi Arabia has to be ‘absolutely delighted’ with the oil market  

Weighing on the oil price outlook more fundamentally is the expected return of the 450,000 barrels per day (bpd) Forties pipeline system in the North Sea in January.

The pipeline, which delivers crude underpinning Brent futures contracts, shut down earlier this month due to a crack. Operator Ineos said on Thursday it expected to complete repairs around Christmas and would gradually restart the system in early January.

Longer term, analysts said rising crude production in the United States, which is fast approaching 10 million bpd, would also weigh on oil prices, undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC producers, including Russia, to tighten the market.

“Supply is expected to grow further, paving the way to an oversupplied market, which can again exercise downward pressure on oil prices,” consultancy Rystad Energy said in a note.

“In 2018 Rystad Energy estimates the (oil) liquids supply to grow around 1.9 million bpd … The return of OPEC volumes after the current cut agreement has expired, coupled with continued strong output growth from North American shale, could result in an oversupplied market in 2019, again putting downward pressure on oil prices,” Rystad said.

The pact to withhold supplies started in January this year and is set to expire at the end of 2018.