Crude Benchmarks Slip From 2014 Highs

An expected rise in US oil production has weighed on prices.An expected rise in US oil production has weighed on prices.

Oil prices on Friday slipped away from December-2014 highs reached the previous day.

Brent crude futures were at $68.97 a barrel, down 29 cents, or 0.4%, from their last close. Brent marked a December-2014 high the previous day, at $70.05 a barrel. US West Texas Intermediate crude futures were at $63.34 a barrel, down 46 cents, or 0.7%, from their last settlement. WTI also rose to its strongest since late 2014 at $64.77, CNBC reported.

Although analysts and traders have been warning of the risks of a downward price correction since the start of the year, they point out that overall market conditions remain strong, largely due to ongoing production cuts led by the Organization of Petroleum Exporting Countries and Russia.

Traders said relatively weak China December oil data had weighed on prices. China’s crude oil imports in December eased to 33.7 million tons, or 7.97 million barrels per day, versus 37.04 million tons in November, customs data showed on Friday.

Meanwhile, its December oil products exports hit a record 6.17 million tons, as refiners churn out more fuel than even thirsty China can absorb.

This has contributed to a fall in Singapore refinery profit margins to below $6 per barrel this month, their lowest seasonal level in five years. As a result, some refiners have already scaled back their output, reducing demand for feedstock crude.

An expected rise in US oil production, currently at 9.5 million bpd, to above 10 million bpd soon has also weighed on prices, traders said. Despite the lower prices on Friday, many analysts expect crude markets to remain firm this year, especially due to the OPEC-led production cuts.

“OPEC has acted successfully to reduce the inventory overhang and demand growth remains robust in the short term,” said Sanjeev Bahl, analyst at Edison Investment Research in a 2018 outlook. The production cuts started in January last year and are set to last through 2018.

“There is potential for oil prices to move higher as inventories normalize,” Bahl said.

US commercial crude oil inventories fell almost 5 million barrels in the week to Jan. 5, to 419.5 million barrels. That’s slightly below the five-year average of just over 420 million barrels.

Fuel price hedging company Global Risk Management said in its 2018 outlook that “the likelihood of elevated oil prices this year seems imminent”, largely due to the ongoing supply cuts led by OPEC and Russia as well as political risk in Iran, Venezuela and Libya.


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