US oil prices hit highest since 2015
US oil prices hit their highest levels since mid-2015 on the final trading day of the year as an unexpected fall in American production and a fall in commercial crude inventories stoked buying. In international markets, Brent crude oil futures also rose, supported by ongoing supply cuts by top producers OPEC and Russia as well as strong demand from China.
U.S. West Texas Intermediate (WTI) crude futures were at $60.30 a barrel at 0504 GMT, up 46 cents or 0.8 percent from their last close, the highest since June 2015. Brent crude futures - the international benchmark - were also up, rising 45 cents or 0.7 percent to $66.61 a barrel. Brent broke through $67 earlier this week for the first time since May 2015.
Since the start of the year, Brent and WTI have risen by 17 and 12 percent, respectively, although the price rises from mid-2017 are much stronger, at nearly 50 percent.
Friday's WTI price rises were driven by a surprise drop in U.S. oil production, which last week dipped to 9.754 million barrels per day (bpd), down from 9.789 million bpd the previous week, according to data from the Energy Information Administration (EIA) released.
U.S. output is still up by almost 16 percent since mid-2016, but most analysts had expected production to break through 10 million bpd by the end of this year - a level only surpassed by top exporter Saudi Arabia and top producer Russia. WTI prices were further boosted by a fall in U.S. commercial crude storage levels, which dropped by 4.6 million barrels in the week to Dec. 22 to 431.9 million barrels, according to the EIA. Inventories are now down by almost 20 percent from their historic highs last March, and well below this time last year or in 2015.
In international markets, China has issued crude oil import quotas totaling 121.32 million tonnes for 44 companies in its first batch of allowances for 2018.
Based on total expected quotas, China's imports - which at around 8.5 million bpd are already the world's biggest - are expected to hit another record in 2018 as new refining capacity is brought online and Beijing allows more independent refiners to import crude. On the supply side, Brent prices have been supported by a year of production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia. The cuts started last January and are scheduled to cover all of 2018.
Pipeline outages in Libya and the North Sea have also been supporting oil prices, although both these disruptions are expected to be resolved by early January.
Consultancy JBC Energy said the Libyan pipeline outages had "no major impact on exports".
U.S. shale drillers appear to have abandoned risky financial strategies that exacerbated the dot-com meltdown and that made the recent oil bust far more painful for Houston companies and their employees.
In recent months, investors have demanded executives focus on delivering investment returns and fueling operations with their own cash, instead of running up large debts or diluting shares in stock sales to pump everincreasing amounts of oil.
It's a big change for a boom-andbust industry, but so far, oil companies seem compliant, even restrained: though oil prices have surged toward $60 a barrel in recent weeks, the number of working U.S. oil rigs hasn't skyrocketed. In fact, the oil-rig count has barely budged since early November.
"The hype is over," said Chris Midgley, global head of analytics at S&P Global Platts. "We're seeing a chance in their behavior and mindset. The dot-com boom mentality has dissipated. Now there's a really strong focus on accountability."
Midgley believes investor pressure will keep the U.S. oil industry in line in 2018 after energy companies under-performed in the S&P 500 Index this year. He also thinks banks will tighten their purse strings for oil producers; that oil field service companies will have to raise prices; and that the world's oil stockpile will decline next year.
Those are just some of the things Midgley and others predict for 2018, a year that could bring the oil industry further out of its financial straits, as long as crude prices remain elevated.
Another thing that might happen next year is a wave of corporate acquisitions of companies who exited bankruptcy court led by new owners: their former bondholders.
Dallas law firm Haynes & Boone, which tracked the bankruptcy cases of more than 130 debt-laden North American oil companies, said most of the time, bondholders end up as shareholders after a company is reorganized in bankruptcy proceedings.
"They're interested sellers because they never intended to own an oil company," said Buddy Clark, a Houston partner and co-chair of the energy practice group at Dallas-based law firm Haynes & Boone. "Those bondholders are not oil men. They're bond traders."
Higher oil prices, Clark said, could mean more of these transactions.
US President Donbald Trump talking to media persons.