MARKET WATCH: NYMEX, Brent prices gain on reported Saudi production cut

Oil prices rose on both the New York and London markets Jan. 12 following reports that Saudi Arabia has cut production by more than it had previously agreed.

Saudi Oil Minister Khalid al-Falih told an energy conference in Abu Dhabi on Jan. 12 that Saudi production is now less than 10 million b/d, which is below its targeted level (OGJ Online, Jan. 12, 2017).

The Organization of Petroleum Exporting Countries and some members outside OPEC agreed to collectively cut 1.8 million b/d of oil production, starting in January. OPEC members agreed to cut a total of 1.2 million b/d. Russia, a non-OPEC producer, agreed to cut 300,000 b/d. Saudi officials say they will review production levels in 6 months.

Skepticism over some producers’ commitment to comply with the negotiated production cuts has kept oil prices volatile. Another concern is that world inventory levels still remain high. It will take time to drain record-high worldwide oil inventories, analysts suggest.

“There’s no sign that we’re drawing down inventories at a particularly rapid clip today. We’re not there yet,” said Seth Kleinman, a Citigroup analyst.

Meanwhile, natural gas levels in underground storage across the Lower 48 fell 151 bcf for the week ended Jan. 6 to a total of 3.16 tcf, the US Energy Information Administration estimated. Stocks were 363 bcf less than this time last year and 4 bcf below the 5-year average of 3.164 tcf, the Weekly Natural Gas Storage Report said.

Energy prices

The light, sweet crude oil contract for February on the New York Mercantile Exchange increased 76¢ on Jan. 12 to close at $53.01/bbl. The March contract gained 78¢ to $53.84/bbl.

The NYMEX natural gas price for February soared by 16¢ to $3.39/MMbtu. The Henry Hub spot gas price closed at $3.32/MMbtu, up 4¢.

Heating oil for February climbed by 2¢ on Jan. 12 to a rounded $1.68/gal. Reformulated gasoline stock for oxygenate blending for February also gained 2¢ to a rounded $1.61/gal.

The Brent crude contract for March on London’s ICE was up 91¢ to $56.01/bbl. The April contract increased 89¢ to $56.49/bbl. Gas oil for January closed Jan. 12 at $492.50/tonne, up $5.50.

The average price for OPEC’s basket of benchmark crudes for Jan. 12 was $52.30/bbl, up $1.32.

Contact Paula Dittrick at paulad@ogjonline.com.

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