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Crude prices decline

22 December 2017 15:00 (UTC+04:00)
Crude prices decline

By Sara Israfilbayova

Oil prices slightly decrease on Friday, among constraints, analysts call the increase in raw material extraction in the U.S. and the expectation of a recovery in the flow through the Forties pipeline.

U.S. West Texas Intermediate (WTI) crude futures were at $58.16 a barrel, down 0.3 percent, from their last settlement, while Brent crude futures, the international benchmark for oil prices, were at $64.81 a barrel, down 0.1 percent, RIA Novosti reported.

The drilling of the North Sea Forties on the pipeline should be fully restored in early January, Ineos, the pipe operator, said on December 21.

Speaking about the long-term perspective, analysts note that the growth in oil production in the U.S., volume of which is rapidly approaching the mark of 10 million barrels per day, will put pressure on oil quotes.

But not all industry experts are so pessimistic. They believe that limiting the extraction of raw materials within the OPEC + pact helped to significantly reduce oil reserves and raise prices.

The supply restraint has resulted in significant reductions of oil inventories and helped push up Brent prices by more than 45 percent since June this year.

“OPEC’s extension of its production cuts through the end of 2018 is a necessary condition for continued inventory drawdown,” U.S. investment bank Jefferies said.

Jefferies said it has raised its 2018 Brent forecast to $63 a barrel from $57, and its WTI forecast to $59 per barrel from $54, on expectations that the market will remain tight.

Meanwhile, Saudi Arabian Energy Minister said that any talk about making changes to the global pact of OPEC+ is premature due to the fact that the oil market is likely to come to balance no earlier than the second half of next year.

“We haven’t seen any major declines in inventories that we didn’t expect. As we said last month, we still have approximately 150 million barrels of overhang, and it is going to take the second half 2018 to draw that down,” Falih said.

“We expect the first few months of 2018 to be either flat or a build (in inventories) as it is typically the case with the seasonality with the oil market especially on the demand side,” he said in an interview in Riyadh.

Russian Energy Minister Alexander Novak said there is a consensus on how to handle an exit from the global oil output cuts deal, but detailed exit talks should only begin when markets approach a balance.

In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan agreed to reduce oil output by 558,000 barrels per day, including Russia by 300,000 barrels per day, starting from January 1, 2017 for six months, extendable for another six months.

OPEC and its allies reached an agreement on prolongation of the deal until the end of 2018 on November 30 in Vienna.

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