Oil’s weekly move muted as Opec cuts seen challenged by supply
HONG KONG: Oil is little changed for the week as the International Energy Agency (IEA) and the Organisation for the Petroleum Exporting Countries (Opec) forecast a boost in supply from outside the producer group next year, putting pressure on efforts to clear a global glut.
Futures rose 0.4% in New York, trimming the weekly loss to 0.2%. While a surplus in developed markets has dropped to a two-year low, new output from competitors including US shale might grow faster than demand in 2018, the IEA said Thursday.
Opec said Wednesday oil markets won’t rebalance until late next year after increasing forecasts for supplies from its rivals.
Oil has averaged about US$50 a barrel this year, the highest since 2014, as Opec and its allies including Russia trim output to drain oversupply. While the group has extended cuts through to the end of 2018, they face rising production from the US that’s forecast to surge above 10 million barrels a day next year to a record.
“Supply is the wild card going into next year,” said Barnabas Gan, an economist at Oversea-Chinese Banking Corp in Singapore. “Inventory levels have narrowed substantially since the start of the year and we look for that to continue into 2018. The recent price rally still appears fragile, so anything that possibly feeds the glut will be a strong impetus to drive oil lower.”
West Texas Intermediate for January delivery was at US$57.24 a barrel on the New York Mercantile Exchange, up 20 cents, at 7:46 am in London. Total volume traded was about 29% above the 100-day average. Prices gained 44 cents to US$57.04 on Thursday.
Brent for February settlement added 9 cents to US$63.40 a barrel on the London-based ICE Futures Europe exchange after climbing 1.4% on Thursday. Prices are little changed for the week and up about 11% this year. The global benchmark crude traded at a premium of US$6.12 to February WTI.
Inventories in developed nations, Opec’s key metric for assessing oversupply, have fallen to their lowest since July 2015 after a further decline in October, the IEA said in its monthly report. The agency bolstered forecasts for growth in supplies outside Opec next year by 200,000 barrels a day.
In 2018, companies from Royal Dutch Shell Plc to Exxon Mobil Corp will find themselves with a surplus of cash to fund dividends, ruling the world of deep water mega-projects, according to Michele Della Vigna, Goldman Sachs Group Inc’s head of energy-industry research.