Tuesday, 23 January, 2018

Oil trades near strongest levels since mid-2015 on Iranian unrest

Oil posts strongest year opening since 2014; Iran unrest pushes up crude Oil prices enjoy strongest new year opening since 2014 as Iran protests push up crude
Nellie Chapman | 02 January, 2018, 18:15

Russia's crude oil production climbed to a record a year ago even as it joined forces with OPEC to clear a global glut and lift prices.

Brent crude futures, the global benchmark, were also down at around $66.67 U.S. a barrel after hitting a May 2015 high of $67.29 United States earlier in the day. The spread between the benchmarks widened throughout the year, as Brent responded to the drawdown in supply from major world producers while US output continued to grow.

China can now import 30 million tons annually (about 600,000 barrels a day) of Russian ESPO crude via pipeline, up from 15 million tons before the second branch opened, the official Xinhua News Agency reported Monday.

Brent rose 0.6% to $67.29 a barrel on the London-based ICE Futures Europe exchange at 7.16am local time.

U.S. West Texas Intermediate (WTI) crude futures settled at $60.42, the highest close since June 2015. US crude output fell through December 22 for the first time since mid-October, slipping from a weekly record after a nine-week expansion. Brent prices climbed 18% in 2017 and global inventories have fallen.

WTI prices were supported by data from the US Energy Information Administration late Thursday showing domestic Crude Oil production declined last week to 9.75-M BPD from 9.79-M BPD the prior week. "There appears to be a developing consensus that the increase in USA shale production this year may not be as significant as many had forecast".

Analysts expect USA production to top 10-M BPD in the next few weeks and to keep growing, limiting efforts by other producers to cap global supplies.

“The U.S. shale impact is now encroaching on uncharted territory, ” analysts at RBC Capital Markets wrote this month, saying it had “redrawn the global crude flow map.”.

U.S. crude oil prices rose above $60 last week, moving above the key level for the first time since mid-2015 mainly due to speculation over the impact of unrest in Iran. Inventories are down by nearly 20 percent from historic highs last March, and well below this time past year or in 2015. Only rising US production, which is on the verge of breaking through 10 million bpd, is weighing on the price outlook for 2018.

In worldwide markets, China has issued crude oil import quotas totalling 121.32 million tonnes for 44 companies in its first batch of allowances for 2018.

"I don't think we're seeing much immediate risk from these protests which are taking place in urban areas but I think it's the backdrop-both political and in the oil market-that mean these are catching attention", said Richard Mallinson, analyst at consultancy Energy Aspects.