Crude oil benchmarks traded moderately lower on Jan. 13, ending a 2-day rally driven by some major producers cutting production, especially Saudi Arabia. Light, sweet crude prices settled above $52/bbl on the New York market while Brent crude settled above $53 on the London market.
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 non-OPEC members 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.
“Someone has got to cut by more, and that is what Saudi Arabia has said it’s doing,” said Ole Hansen of Saxo Bank, noting that overall production-cut compliance is expected to be 60-80%.
Libya, exempted from cutting production, produced an estimated 700,000 b/d or more in early January compared with 260,000 b/d during August 2016.
“The market is settling into range while we wait for confirmation about the cutting process,” Hansen said. OPEC is scheduled to release its monthly Oil Market Report featuring January production figures on Feb. 13.
“At that point, we should get a full picture of what OPEC countries said it had been pumping compared with third-party estimates,” Hansen said.
Saxo Bank maintains that the oil market will be range bound in the short term with risk to the downside.
“The ranges are $51-55/bbl in WTI crude oil and $53.50-58/bbl in Brent crude oil,” Hansen said of West Texas Intermediate.
Meanwhile, the US drilling rig count dropped by 6 to 659 working units during the week ended Jan. 13, marking its first decrease since Nov. 11, 2016, said a weekly report from Baker Hughes Inc. data (OGJ Online, Jan. 13, 2017).
The light, sweet crude oil contract for February on the New York Mercantile Exchange decreased 64¢ on Jan. 13 to close at $52.37/bbl. The March contract dropped 69¢ to $53.15/bbl.
The NYMEX natural gas price for February gained 3¢ to $3.42/MMbtu. The Henry Hub spot gas price closed at $3.36/MMbtu, up 4¢.
Heating oil for February fell by 2¢ on Jan. 13 to a rounded $1.65/gal. Reformulated gasoline stock for oxygenate blending for February gained less than a penny to remain at a rounded $1.61/gal.
The Brent crude contract for March on London’s ICE was down 56¢ to $55.45/bbl. The April contract decreased 58¢ to $55.91/bbl. Gas oil for February closed Jan. 13 at $487.50/tonne, down $5.
The average price for OPEC’s basket of benchmark crudes for Jan. 13 was $52.64/bbl, up 34¢.
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