Supply discipline and demand to prop up oil prices in 2018

AUSTRIA OPEC

Crude prices ended 2017 with a bang on Friday, with West Texas Intermediate closing above $60 for the first time in over two years, and Brent said to be supported by strong demand from China.

Brent crude oil in particular is being supported by ongoing supply cuts by top producers OPEC and Russian Federation as well as strong demand from China.

Oil prices rose on Wednesday, with USA light crude hitting highs not seen since June 2015 after disruptions to a major pipeline dented Canadian deliveries to the United States, where crude inventories were also reported to be falling.

OPEC and Russia's efforts to curb oil output, combined with forecasts for strong global demand growth, are expected to keep crude prices close to US$60 a barrel in 2018, a Reuters poll of analysts showed. Since the start of the year, Brent and WTI have risen by 17 and 12%, respectively, although the price rises from mid-2017 are much stronger, at almost 50%.

Data released today from EIA for October largely confirms earlier predictions by Rystad Energy that US oil production could reach 10 MMbpd at the end of 2017.

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United States output is still up by nearly 16% 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 Russian Federation.

The price for March Futures Brent oil grew by 0,67% to stand at $66,60 per barrel on the London ICE Futures Exchange. Inventories excluding the nation's strategic reserve have declined more than 11 per cent in the a year ago. Strong growth of US onshore production in October was masked by impacts of hurricane Nate on offshore production in the Gulf of Mexico which was down as much as 250,000 bpd below monthly capacity.

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.

Prices also continue to be helped by pipeline outages in Libya and the North Sea, although both issues could be resolved early next year.

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