Oil prices rise on tightening supply, strong demand

A mooring station for oil tankers can be seen at the Trans-Alaska Pipeline Marine Terminal in Valdez, Alaska, in this file photo. (REUTERS)
Updated 23 October 2017
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Oil prices rise on tightening supply, strong demand

SINGAPORE: Oil prices rose on Monday over supply concerns in the Middle East and as the US market showed further signs of tightening while demand in Asia keeps rising.
Brent crude futures, the international benchmark for oil prices, were at $57.84 at 0056 GMT, up 9 cents, or 0.16 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $52.03 per barrel, up 19 cents, or 0.37 percent.
“Oil prices are holding comfortably above $50 as possible supply disruptions in the Kurdish region of Iraq support prices,” said William O’Loughlin, investment analyst at Rivkin Securities.
“US production was also recently impacted by a hurricane for the second time in as many months and the number of US drilling rigs declined for the third week in a row,” O’Loughlin said.
The amount of US oil rigs drilling for new production fell by seven to 736 in the week to Oct. 20, the lowest level since June, General Electric Co’s Baker Hughes energy services firm said on Friday.
Much will depend on demand to guide prices, with the US market tightening, flows from Iraq reduced due to fighting between government forces and Kurdish militant groups, and production still being withheld as part of a pact between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers to tighten the market.
In the main growth areas of Asia, consumption remains strong especially in China and India, the world’s number one and three importers.
India imported a record 4.83 million barrels per day (bpd) of oil in September as several refiners resumed operations after extensive maintenance to meet rising local fuel demand.
The country’s September imports stood 4.2 percent above this time last year and about 19 percent more than in August, ship-tracking data from industry sources and Thomson Reuters Analytics showed.
Given the tightening oil market conditions, many analysts expect prices to rise further.
“We will see oil prices higher by 10 percent by the end of the year. We have started to accumulate strong positions within the oil sector,” said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers.


Oil prices up almost 3 pct as OPEC agrees to raise output

Updated 22 June 2018
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Oil prices up almost 3 pct as OPEC agrees to raise output

  • Oil prices rose almost 3 percent on Friday as OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand.
  • The Organization of the Petroleum Exporting Countries agreed on Friday to boost output from July.

LONDON: Oil prices rose almost 3 percent on Friday as OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand.
Benchmark Brent crude jumped $2.19 a barrel, or almost 3 percent, to a high of $75.24 before slipping to around $75 by 1305 GMT. US light crude was $1.80 higher at $67.34.
The Organization of the Petroleum Exporting Countries, meeting in Vienna, agreed on Friday to boost output from July after Saudi Arabia persuaded Iran to cooperate in efforts to reduce the crude price and avoid a supply shortage.
Two OPEC sources told Reuters the group agreed that OPEC and its allies led by Russia should increase production by about 1 million barrels per day (bpd), or 1 percent of global supply.
But the real increase will be smaller because several countries that recently underproduced oil will struggle to return to full quotas while other producers will not be allowed to fill the gap.
The deal looked to be in line with many analysts' forecasts.
Analysts had expected OPEC to announce a real increase in production of 500,000 to 600,000 barrels per day (bpd), which would help ease tightness in the oil market without creating a glut.
"The effective increase in output can easily be absorbed by the market," Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas told Reuters Global Oil Forum.
Oil prices have been on a roller-coaster ride over the last few years, with the international marker, Brent, trading above $100 a barrel for several years until 2014, dropping to almost $26 in 2016 and then recovering to over $80 last month.
The most recent price rally followed an OPEC decision to restrict supply in an effort to drain global inventories.
The group started withholding supply in 2017 and this year, amid strong demand, the market tightened significantly, triggering calls by consumers for higher supply.
Falling production in Venezuela and Libya, as well as the risk of lower output from Iran as a result of US sanctions, have all increased market worries of a supply shortage.
Another big uncertainty for oil is the escalating dispute between the United States and its trading partners, which could hit US crude oil exports to China.
Asian shares hit a six-month low on Friday as tariffs and the US-China trade battle start taking their toll.
If a 25 percent duty on US crude imports is implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere.
Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.