Oil prices stay high

01 January, 2018, 03:51 | Author: Barbara Daniel
  • Oil hits highest close since June 2015

Brent broke through $67 earlier this week for the first time since May 2015.

However, the strong close outs of the year herald what many experts say is the inevitable outcome of high prices: increased US production in 2018, which will clash directly with the Organization of the Petroleum Exporting Countries' (OPEC) ongoing attempt via its extended output cutbacks to rebalance the market.

West Texas Intermediate crude oil futures finished higher on Thursday.

The rise saw WTI hitting its highest level since June 2015 on the final trading day of 2017.Brent crude futures - the global benchmark for oil prices - were also up, rising 33 cents or 0.5 percent to $66.49 a barrel.

US production is expected to rise to 9.2 million barrels per day (bpd) in 2017 and a record 10.0 million bpd in 2018 from 8.9 million bpd in 2016, according to federal energy projections this week. While this puts the company in dire straits when the discount is as large as it is today, it also gives the stock higher leverage to rising oil prices.

Oil markets have tightened after a year of production cuts led by Middle East-dominated Organisation of the Petroleum Exporting Countries (OPEC) and Russian Federation.

Inventories are now down by nearly 20% from their historic highs last March and well below this time previous year or in 2015. Output peaked at 9.6 million bpd in 1970.

Federal Reserve Bank insists oil must exceed $60 for a boost in USA drilling.

On the supply side, Brent prices have been supported by a year of production cuts led by the Organization of Petroleum Exporting Countries and Russian Federation. The US expects production to top 10 million barrels a day in the coming year.

OPEC cuts kicked off last January and are scheduled to continue throughout 2018.

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