OPEC eclipses boom in US out­put

The Myanmar Times - Weekend - - International Business -

OIL rose on Thurs­day af­ter a sur­vey showed OPEC’S com­mit­ment to its sup­ply cuts re­mains in place, even as U.S. pro­duc­tion topped 10 mil­lion bar­rels per day for the first time since 1970.

Brent April crude fu­tures were up 49 cents on the day at $69.38 a bar­rel by 0946 GMT, while NYMEX crude for March de­liv­ery rose 45 cents to $65.18 a bar­rel.

Brent crude rose by 3.3 per­cent in Jan­uary, its strong­est start to the year for five years, in line with a broad rise in other risk-linked as­sets such as U.S. equities, which hit record highs last month and marked their big­gest Jan­uary in­crease since 1997.

With in­vestors now pon­der­ing which of oil’s cur­rent key driv­ing forces will prove to be the dom­i­nant one - ris­ing US crude out­put, or OPEC’S ad­her­ence to its sup­ply cuts, the re­la­tion­ship with equities and even the dol­lar is likely to erode.

“I don’t think it’s durable, that sud­denly we see oil and the S&P at­tached at the hip. They have co­in­ci­den­tally done well and it’s profit-tak­ing. But I think their for­tunes are go­ing to di­verge and this cor­re­la­tion won’t sur­vive the test of time,” Lon­don Cap­i­tal Group head of re­search Jasper Lawler said.

“The other fac­tor is that big $70 level in Brent. That is pretty much the top of the range for most fore­casts out there. So again, that’s a price level that gives some pause for thought. I don’t think we should go back to 60 but I think prob­a­bly 65 seems like a log­i­cal area to ... start re­fo­cus­ing on the fun­da­men­tals of the mar­ket ver­sus gen­eral sen­ti­ment.”

Gold­man Sachs raised its three-month fore­cast for Brent to $75 from $62 and its six-month fore­cast to $82.50 from $75. Oil prices are un­likely to ad­vance much above $70 a bar­rel in 2018, given the tug of war be­tween OPEC and the U.S. shale industry, a Reuters poll showed on Wednesday.

US crude oil pro­duc­tion in Novem­ber sur­passed 10 mil­lion bpd for the first time since 1970, and neared the all-time out­put record, the En­ergy In­for­ma­tion Ad­min­is­tra­tion said on Wednesday. The EIA also re­ported the big­gest in­crease in crude oil stocks since March last year, a rise of 6.8 mil­lion bar­rels.

“As oil prices rise, higher shale out­put is def­i­nitely on the mar­ket’s mind,” said To­momichi Akuta, se­nior econ­o­mist at Mit­subishi UFJ Re­search and Con­sult­ing in Tokyo.

Out­put by the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (OPEC) also rose in Jan­uary from an eight-month low as higher out­put from Nige­ria and Saudi Arabia off­set a fur­ther de­cline in Venezuela, a Reuters sur­vey found.

How­ever, ad­her­ence by pro­duc­ers in­cluded in the deal to curb sup­ply rose to 138 per­cent from 137 per­cent in De­cem­ber, sug­gest­ing com­mit­ment is not wa­ver­ing even as oil prices hit their high­est since 2014.

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