MARKET WATCH: Brent crude oil falls closer to $55/bbl on stronger US dollar

Light, sweet crude prices gained slightly on the New York market on Jan. 17 as trading resumed after the Martin Luther King Jr. holiday on Jan. 16. But the US benchmark fell in early Jan. 18 trading on reports of a strengthening dollar and expectations that US producers will increase unconventional oil production.

The Wall Street Journal Dollar Index, which tracks the dollar’s value in relation to a basket of other currencies, rose 0.39% to 91.35 on Jan. 18. Oil is traded in dollars. A stronger dollar makes crude oil more expensive for buyers using other currencies.

The US Energy Information Administration estimated US unconventional oil production will rise to 4.75 million b/d in February. EIA revised its unconventional oil production for January to 4.71 million b/d from 4.54 million b/d (OGJ Online, Jan. 17, 2017).

“This confirms that US shale oil production has bottomed out,” Commerzbank analysts said in a research note. They suggest rising shale production will make it harder to rebalance oil supply and demand.

The Organization of Petroleum Exporting Countries and some non-OPEC members agreed to collectively cut 1.8 million b/d of oil production. The cuts started in January. OPEC members agreed to cut 1.2 million b/d. Of the non-OPEC participants, Russia said it will cut 300,000 b/d.

Goldman Sachs analysts expect US oil production will rise by 235,000 b/d during 2017 compared with 2016, partially because drilled but uncompleted wells (DUCs) can be brought on stream quickly. Producers increased DUC tallies because of low oil prices.

EIA estimated US oil production was 8.95 million b/d as of Jan. 13. The next Weekly Petroleum Status Report is scheduled for Jan. 19, one day later than normal because federal offices were closed on Jan. 16 for the Martin Luther King Jr. holiday.

Energy prices

The light, sweet crude oil contract for February on the New York Mercantile Exchange increased 11¢ on Jan. 17 to close at $52.48/bbl. The March contract also gained 11¢ to $53.26/bbl.

The NYMEX natural gas price for February dropped less than a penny to $3.41/MMbtu. The Henry Hub spot gas price closed at $3.31/MMbtu.

Heating oil for February edged down less than 1¢ on Jan. 17 to remain at a rounded $1.65/gal. Reformulated gasoline stock for oxygenate blending for February dropped 1¢ to $1.60/gal.

The Brent crude contract for March on London’s ICE settled on Jan. 17 down 39¢ to $55.47/bbl. The April Brent contract was down 34¢ to $55.94/bbl. Gas oil for February closed Jan. 17 at $490.75/tonne.

The average price for OPEC’s basket of benchmark crudes for Jan. 17 was $52.60/bbl, up 43¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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