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Good news for Nigeria as oil prices hit $57

Sep 27, 2017, 00:31
Good news for Nigeria as oil prices hit $57

Global benchmark Brent crude futures rose 1.55 per cent to $57.74 per barrel while U.S. benchmark West Texas Intermediate traded up 1.3 per cent at $51.32 per barrel at the time of writing.

The rally in oil showed little signs of slowing on Friday, with Brent hitting six-month highs above $56 a barrel on optimism that OPEC will not flood the market with supplies despite its decision not to extend production cuts through next year.

And other analysts were skeptical about further price gains due to increased refining and higher crude output from the United States.

Oil prices burst out of the gate this week, rising more than 3% on Monday.

U.S. West Texas Intermediate (WTI) crude futures dipped 0.16% to $50.58 a barrel by close of trade, not far from its highest level since May 25 at $51.11 reached on Wednesday.

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Furthermore, oil prices have gained over 30% since June as global inventories have tightened following expanding demand from industrialised countries as well as emerging markets for the first time in almost a decade. That said, while the market is pinning its hopes on OPEC, the wild card for higher prices is shale, which has become the new swing producer. The EIA revised lower US oil production for 2017 from 9.35 million barrel per day to 9.25 million barrels per day a 100k barrel a day decrease. A gathering in Vienna last week between OPEC and its allies ended with no decision on an extension or deepening of the cuts beyond the first quarter of 2018, while the potential revival of USA shale production is also weighing on the outlook for prices.

Turkey repeated a threat to cut off the pipeline that carries 500,000-600,000 barrels per day (bpd) of crude from northern Iraq to the Turkish port of Ceyhan.

Even as both contracts rallied, concerns about USA production growth weighed on WTI, widening its discount, he said.

Geoffrey Craig, an oil futures editor at Platts, said in an emailed report the market situation is still anything but normal. EIA also revised lower 2018 US oil production from 9.91 million b/d to 9.84 million b/d, a 70k b/d decrease.

The OPEC, Russia and several other producers have cut production by about 1.8 million barrels per day since the start of 2017, helping lift oil prices by about 15% in the past three months.

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The Energy Information Administration reported Wednesday that total USA crude production rose by 157,000 barrels a day to 9.510 million barrels while US crude supplies rose by roughly 4.6 million barrels for the week ended September 15. The deal was extended in May through March 2018 and signatories have recently indicated a willingness to potentially hold back production through next year.

Kuwaiti Oil Minister Essam al-Marzouq, who chaired the meeting, said the market "is evidently well on its way towards rebalancing".

"We're seeing more and more evidence that it's not the global oil companies, it's not the independent oil companies that are lagging new investments, but it's OPEC countries lagging, particularly those five", he said.

Much of this production will be exported as USA refiners along the Gulf Coast aren't capable of processing more light crude, having been set up to deal more with heavier and sour grades from offshore Gulf of Mexico platforms and imports from the Middle East.

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