The US light, sweet crude oil futures contract for January delivery gained somewhat to settle at $51.50/bbl on the New York market Dec. 9. Oil prices held generally steady before the Dec. 10 meeting between the Organization of Petroleum Exporting Countries and non-OPEC countries to discuss production levels.
Non-OPEC producers agreed to reduce production by 558,000 b/d in response to OPEC’s Nov. 30 decision to reduce production by 1.2 million b/d.
OPEC had asked non-OPEC producers to cut by 600,000 b/d, of which Russia is expected to cut about 300,000 b/d. It was the first time since 2001 that both OPEC and non-cartel members have joined in cutting output.
Saudi Energy Minister Khalid al-Falih said at a news conference on Dec. 10 that Saudi Aramco could cut more than the 486,000 b/d as announced by the cartel earlier.
“I can tell you with absolute certainty that, effective Jan. 1, we’re going to cut and cut substantially to be below the level that we have committed to on Nov. 30,” he said.
Barclays analyst Michael Cohen issued a note questioning OPEC’s ability to manage production levels long enough to cut existing world crude oil oversupply.
“We fear there are too many moving parts,” Cohen said. “The strategy is bound to overshoot, in our view, leading to higher tight-oil production and lower oil prices in the second half of next year.”
Barclays still expects global oil demand will exceed global supply in 2017.
“We expect prices to average in the mid-$50s in the first quarter 2017, unchanged from our prior forecast, but there are several catalysts that could drag oil lower during this period, including weather, returning supply, and weaker margins,” Barclays said in Blue Drum research note. “We expect prices to move to the $60[/bbl] range in the second quarter as demand continues to outpace supply.”
The January crude oil contract on the New York Mercantile Exchange gained 66¢ on Dec. 9 to close at $51.50/bbl. The February contract rose 56¢ to $52.44/bbl.
The natural gas contract for January was up 5¢ to a rounded $3.75/MMbtu. The Henry Hub spot market for gas closed at $3.75/MMbtu, up 9¢.
Heating oil for January rose 1¢ to a rounded $1.64/gal. Reformulated gasoline stock for oxygenate blending for January increased less than a penny to a rounded $1.51/gal.
The Brent crude contract for February on London’s ICE was up 44¢ to $54.33/bbl. The March contract increased 46¢ to $55.06/bbl. Gas oil for January closed Dec. 9 at $477.50/tonne, up $10.75.
The average price for OPEC’s basket of benchmark crudes for Dec. 9 was unavailable because the OPEC offices were closed Dec. 12.
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