Oil prices steady as rising US outpout undermines OPEC cuts
SINGAPORE (Reuters) – Oil prices were little changed yesterday as the impact from expectations of an extended OPEC-led production cut was canceled out by rising output in the United States.
Brent crude futures the international benchmark for oil prices, were at $62.20 per barrel at 0301 GMT, eight cents above their last close.
US West Texas Intermediate (WTI) crude futures were at $56.50 a barrel, also up eight cent from their last settlement.
Traders said they were avoiding taking on large new positions due to uncertainty in markets.
The Organization of the Petroleum Exporting Countries (OPEC), together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year in a bid to end a global supply overhang and buoy prices.
The deal to curb output is due to expire in March 2018, but OPEC will meet on Nov. 30 to discuss the outlook for the policy.
OPEC is expected to agree to extend cuts as storage levels remain high despite recent drawdowns, although there are doubts about the willingness of some participants to continue to restrict their production.
“If the OPEC/non-OPEC cuts continue, the stocks surplus will reduce to just some 50 million barrels above the five-year average in 3Q 2018 (down from 140 million barrels above that average now) and prices will hit $65-70 per barrel,” energy consultancy FGE said yesterday.
Outside the group of producers voluntarily withholding output, the biggest headaches for OPEC has been rising US drilling activity, led by shale oil producers.
Energy consultancy Westwood Global Energy Group said US output would climb even faster than implied by the rising rig count, which has jumped from 316 rigs in mid-2016 to 738 last week, as producers get more productive per well.
“Westwood Global Energy forecasts an 18 percent increase in active rigs in 2018, but more rapid demand growth in certain service areas as operators focus on efficiency and delivering more for less,” the consultancy said.