Published: Sat, December 16, 2017
Finance | By Loren Pratt

World oil prices up

World oil prices up

USA oil production is accelerating and a 2015 end to a ban on exports means more of it is on the open market.

At the end of November, 24 nations that account for around 60 percent of the world´s oil supply agreed at a meeting in Vienna to keep a lid on output for all of 2018 in order to push up prices.

"After the initial surge that understandably accompanies such a major supply disruption, the market has settled down again and, unless another dramatic event occurs in what remains of 2017, it looks as if the Brent crude price will average about $54 (per barrel) for the year, an increase of 20 percent on 2016", the IEA said.

However, signs of increasing supply has put pressure on the market.

Singapore's OCBC bank said on Thursday in its 2018 commodities outlook that a "further rise in prices could well be met by stronger USA production as shale oil players turn taps on", suggesting oil prices may not rise too far in 2018.

"Today's price action is more related to a rather dovish sounding monthly report from the International Energy Agency", said Giovanni Staunovo, commodity analyst at UBS Wealth Management.

Undermining OPEC's efforts to tighten the market is US oil production, which has soared by 16 percent since mid-2016 to 9.78 million barrels per day (bpd), close to levels of top producers Russian Federation and Saudi Arabia. In late November, OPEC, with the help of non-member states like Russian Federation, chose to extend the effort for another year.

But the IEA warned that "when our USA outlook is added to expectations for the other producers, output from non-OPEC countries could rise by 1.6 million per day in 2018, an increase of 200,000 bpd to our [previous] forecast".

The IEA said OECD commercial stocks fell by 40.3 million barrels in October to 2.94 billion barrels, the lowest since July 2015 and 111 million barrels above the five-year average, which is Opec's target for inventories.

"On considering the final component in the balance - non-OPEC production - we see that 2018 might not be quite so happy for OPEC producers", the IEA noted. However, the fall was offset to some extent by gasoline stocks rising by 5.7 million barrels.

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