OPEC members not keen on Brent prices above $60

OPEC members not keen on Brent prices above $60

Troy Powers
January 10, 2018

OPEC appears determined to end the global supply glut with disciplined output quotas in 2018. Brent crude gained 18 cents at $67.96 per barrel by 11:08 a.m. EST and earlier in the session touched $68.29, its highest since May 2015.

Analysts say United States output may have levelled off over the holidays.

The American Petroleum Institute reports its weekly inventories numbers this afternoon, followed by the government's official report tomorrow morning.

Oil prices closed at fresh three-year highs Tuesday, as geopolitical risk and confidence in global growth continued to buoy markets.

OPEC officials also think the 2018 rally has been mainly driven by unrest in Iran, rather than a tighter balance between supply and demand, giving rise to concern it may not last.

Crude oil prices fell Friday, dropping from highs last seen in 2015, as soaring US production undermined a 10% rally from December lows that were driven by tightening supply and political tensions in OPEC member Iran, Reuters reported. Economic collapse is leading to involuntary production cuts in Venezuela, another OPEC member.

This week's supply reports from the American Petroleum Institute and the USA government's Energy Information Administration are predicted to reveal that us crude stocks dropped by 4.1 million barrels, an eighth week of decline.

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There is no sign yet that OPEC is prepared to relax its supply restraint.

The rise in prices is expected to drive gains in USA production during 2018, offsetting curbs by others.

The surge comes as a welcome boost for the revenues of oil-producing nations, many still reeling from a price collapse that started in mid-2014 when crude began to fall steeply from above $100 per barrel due to oversupply.

Despite this, USA production is expected soon to rise above 10 million barrels per day, largely thanks to soaring output from shale drillers.

Some in OPEC are anxious a prolonged rally could stimulate more US shale oil output, however, creating more oversupply that could weigh on prices and market share.

"If WTI were to go back below the 2017 high of $60.48, which was hit late in the year, and the 2018's opening price of $60.09, then the technical outlook would turn bearish on oil".