Crude prices on Friday, while dropping, are still near two year highs. File Image / Pixabay
West Texas Intermediate on Friday remained close to its highest levels since 2015 despite settling 43 cents lower to $56.74 per barrel, and Brent settling down 37 cents to $63.56 per barrel, and this altogether still meant both contracts would rise about 3 percent for the week, a fifth consecutive week of gains.
The fairly strong performance comes amid more indications of the global glut starting to clear, this time in the form of Thomson Reuters Eikon shipping data showing that around 15 supertankers in waters off Singapore and western Malaysia are storing around 30 million barrels of crude: this is half the number of ships in June, and down from 40 tankers holding surplus fuel in mid-2017.
Eng Hian, head of trading at Agritrade Energy, said, "There are less incentives for traders to hold crude given rising crude oil prices and premiums. So to some extent, the OPEC [Organization of the Petroleum Exporting Countries] cuts have worked."
The higher price level should lead to a further rise in U.S. shale oil production
Analysts at Commerzbank said, "Market participants expect OPEC to extend the production cuts beyond March 2018 and stocks to decline further"; however, "the higher price level should lead to a further rise in U.S. shale oil production."
Presumably another major event that might affect global stocks and prices is Venezuela production output reportedly set to drop to 1.84 million barrels per day next year, the lowest compared with official government data since 1989, according to a survey compiled by Bloomberg.
Plus, said Thomas Olney, an analyst at Facts Global Energy,"crude quality is deteriorating rapidly," to the point where buyers have turned away some cargoes, while claims for discounts on others are mounting.
Despite what seems to be a tightening market, energy consultancy FGE earlier this week warned that rising U.S. shale production and the prospect of OPEC supplies increasing after the expiry of its cutback initiative could lead to lower prices in 2019.