Saturday, 20 October, 2018

Oil prices up amid declining drilling rigs in US

Nigeria, Libya Oil Output Threaten Global Market Kenanga Research sees oil price recovering in second half of the year
Laurie Berry | 03 July, 2017, 18:26

Brent crude oil futures went up 0.50 dollar or 1.05 percent to close at USD 47.92 a barrel at NYMEX. Last week, it fell significantly below $45.

US crude futures settled up 19 cents at $44.93 a barrel after hitting a two-week high of $45.45 in late-morning trading. The rig count had risen for the previous 23 weeks.

Other fields have reopened, most recently the Abu Attifel deposit which resumed production last month and is now pumping about 81,000 bpd, according to the person who gave the latest production figure.

Meantime, there is still a glut as production activity within OPEC has climbed to a 2017 high. "Disappointment about the slower-than-expected market rebalancing will keep prices depressed well into next year", Carsten Fritsch, an analyst at Commerzbank, told the WSJ.

On Friday, data from USA energy services firm Baker Hughes revealed drilling activity for new oil production dropped by two rigs.

By increasing its output sharply towards the end of last year, before it reached a deal to curb output this year, Opec left itself vulnerable to the quick return of USA shale oil and the recovery of production in exempt members, Libya and Nigeria, argues the bank.

Brent crude, the worldwide oil price benchmark, fell below $46 a barrel yesterday after peaking earlier this year at $56 a barrel. The OPEC members did not announce any specific deals or anything fundamental in terms of supply to support the oil prices and this was a disappointment for the oil bulls who were expecting some decent help from the OPEC as higher oil prices are likely to help their economy as well.

It rallied a little this afternoon and at the time of writing was at $45.35.

Oil costs have surged to a 17-month high after a gathering of the world's biggest makers, including Saudi Arabia and Russian Federation, consented to lessen yield in a historic point bargain.

Small plane crashes with fatalities in northwest Georgia
WTVC in Chattanooga says authorities confirmed there were four people on the plane and none of them survived the crash. At the time of the crash, Langford said the conditions included rain, strong wind, and lightning.

However, US reserves data is no longer moving the market. Its weekly report, released Wednesday, indicated crude stockpiles rose by 100,000 barrels to 509.2 million barrels.

Rising U.S. production has undermined some of the impact of the OPEC-led cuts. Meanwhile, exports of crude oil and petroleum products amounted to six million barrels per day as of April 2017.

The trend in oil prices in recent weeks has been to the downside, but Jason Schenker, president of Prestige Economics says the market needs to be patient.

"The market's calls for further cuts from OPEC continue to be rejected by the oil group", ANZ said in a note. 2020 could see a secular recovery in the oil market.

Another factor, affecting oil prices is concern about the growth of oil production in Libya. The fall in prices due to the oversupply of oil has had a twofold effect, from the demand side and from the cost side. The number of drilling rigs in the country has grown by 2.18 times year-on-year. The Organization of Oil Exporters' Countries (OPEC) has made a decision to cut production to reduce the excess availability of oil globally.

United States shale oil output is also rising, with new drilling wells rising for 22 consecutive weeks. Brent crude contracts for the same month, the global benchmark, were seen little-changed at $48.80 per barrel.

Forecasts for the future are also dire. According to the EIA, 682 million barrels are held as of today. This compares to output of more than 11.2 million bpd in October past year, taken as the baseline for the global deal. OPEC has exempted Nigeria and Libya from the curbs, leaving them free to ramp up output that had been sapped by local unrest.

The research house said compliance among OPEC members to cut 1.2 million bpd of oil from the market is strong so far but pressure is beginning to build up to sustain the discipline up to June 2018. Exports rose by 11,000 barrels a day to 528,000 barrels per day.

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