Oil prices firm on strong demand, political uncertainty in Syria
SINGAPORE – Oil prices were firm on Monday, supported by strong demand and political uncertainty in Syria, although another rise in US drilling activity kept a lid on gains.
Brent crude futures LCOc1, the international benchmark for oil, were at $55.28 per barrel at 0226 GMT, up 4 cents from their last close.
US West Texas Intermediate (WTI) crude futures CLc1 were up 10 cents at $52.34 a barrel.
Traders said prices were being supported by strong demand, and also political uncertainty following the US missile air strikes on Syria late last week.
ANZ bank said on Monday that strong oil demand and “an unsettled global backdrop (is) leaving the market very finely balanced”.
However, another increase in US oil drilling, which has run up for 12 straight weeks to 672 rigs – the highest level since August 2015, kept markets from breaking last week’s one-month highs of over $56 per barrel.
US bank Goldman Sachs said following the rig data release that year-on-year US oil production “would rise by 215,000 barrels per day in 2017” once a backlog of production waiting to be brought back online was taken into account.
The soaring output in the United States contrasts with a supply cut led by the Organization of the Petroleum Exporting Countries (OPEC), which hopes to prop up prices by reducing supplies in the first half of 2017 – and maybe even beyond.
This allows US producers to sell rising amounts of cheap US crude into the rest of the world, where prices are higher.
“Reduced OPEC volumes and stronger US output will result in a deeper discount for US crude and support greater exports from the US to Asia over the coming months,” BMI Research said, although it added that in terms of overall volumes, “the US will remain a small player in Asia as OPEC actively protects its market share.”
Beyond the United States, other producers are also benefiting from OPEC’s supply cuts and artificially tighter market.
Brazil’s oil exports have soared 65 percent since February 2016, to record highs of more than 1.46 million bpd, according to government data obtained by Reuters.
Consultancy Wood Mackenzie estimates 2017 exports will hit nearly 1 million bpd, up from 798,000 bpd last year. -Reuters