OPEC compliance still working
Oil prices remained steady the morning of Feb. 1 as OPEC compliance thwarted U.S. tight oil production increases although naysayers predicted the Organization of the Petroleum Exporting Countries’ reduction pact would not be able to offset news that U.S. output had topped 10 million barrels per day for the first time since 1970.
London Brent crude for April delivery was down 1 cent at $68.88 a barrel, after settling up 3 cents in the previous session, per Reuters.
The Alaska Department of Revenue reported that at market close on Jan. 30, Alaska North Slope crude had slipped $1.34 to $69.33. The ANS crude’s high had been on Jan. 26 when the closing price was $71.28.
The U.S. is the world’s third largest oil producer; Russia is the largest, currently producing about 11 million barrels a day.
In November, U.S. crude oil production approached an all-time output record, the Energy Information Administration said Jan. 31.
“As oil prices rise, higher shale (tight oil) output is definitely on the market’s mind,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.
OPEC oil output also rose in January from an eight-month low as higher output from Nigeria and Saudi Arabia offset a further decline in Venezuela and strong compliance with a supply reduction pact, a Reuters survey reported. (Despite oil prices doubling since their lows in January 2016, Venezuela’s state-owned PDVSA is in bad shape, the country’s currency essentially useless and oil production declining at a pace comparable to all other OPEC members combined.)
Loyalty by producers included in the OPEC pact to curb supply rose to 138 percent in January representing a 1 percent increase over December, the poll found, which suggests their commitment is not wavering even as oil prices rise to their highest point since 2014.
“OPEC nations realize that lower production would buoy oil prices and that it’s better for them,” Akuta explained.
A Reuters’ poll showed oil prices were unlikely to progress much above $70 a barrel in 2018, “with the market caught between the opposing forces of OPEC-led production cuts and surging U.S. output,” Reuters reported Jan. 31.
That same day oil prices dropped after the U.S. Energy Information Administration, or EIA, indicated U.S. crude inventories increased by 6.8 million barrels the previous week, after 10 straight weeks of declines.
But Reuters reported that prices “rebounded on the back of a surprise 2 million barrel drawdown in gasoline stocks, helping push up gasoline futures.”
Distillate stockpiles, including diesel and heating oil, dropped by 1.9 million barrels, despite predictions of a 1.5 million barrel decline, the EIA data also reported.
- KAY CASHMAN