Oil price: OPEC+ will continue to regulate the market, production in the U.S. is growing
World oil prices in the past period have generally declined in response to falling crude oil consumption due to early exit of the refinery for repairs. The cost of grade WTI have grown due to the remaining high domestic demand from us refineries. Support to the market was rendered by statements of Saudi Arabia and Russia about the possible long-term cooperation and commitment to compliance with the transaction OPEC+.
In the result, the price of WTI rose to $61,77, and prices for BRENT — to $65,05. The spread between grades of oil as of February 15, 2018 narrowed to $3, the ratio of the spread to the price of WTI is 4.9%.
The theme of the week was the meeting of President of Russia and the king of Saudi Arabia, the results of which made a statement of commitment to compliance with the OPEC deal+ until the end of 2018, about inappropriate exit from the trade before this time about the possible continuation of cooperation on coordination of actions in the oil market in 2019 and beyond. The parties also welcomed the growth of oil production in the United States, dispel fears a possible increase of the abundance of oil on the market due to this factor.
Special attention will be paid to the state stocks, especially stocks in floating storage, transit zones and countries outside the OECD. Also for the first time made a statement that the major manufacturers are becoming more tolerant to a small deficit in the oil market than to early exit trades.
Russian energy Minister Alexander Novak said that it may take from two to five months to close a deal on the reduction of oil production if suddenly the decision is taken. It is expected that the duration of this transaction will be considered at the next meeting of OPEC, scheduled for June 2018 At the same time saying that any decision on a gradual exit from the transaction will be made after the world oil reserves will return to a five-year average value. Monitoring the meeting of the parties to the transaction OPEC+ scheduled for April 2018
For February according to the IEA, OECD commercial stocks fell in December 2017 very sharply by 55.6 million barrels and amounted to 2 851 million barrels to 52 million barrels higher than the five-year average inventory level. The supply of oil in the world in January 2018 dropped to 97.7 million barrels per day. A proposal from OPEC totaled 32,16 million barrels a day, supply from countries outside OPEC to 58.6 million barrels per day.
Discipline in complying with the Covenant by countries outside OPEC in January was 85%. Expected slowdown in global processing in the first quarter of 2018, which will lead to slightly surplus balance at the end of the first quarter. “Peak” output of the refinery for scheduled maintenance will be in March-April.
In the February report, OPEC reported that global oil market will return to balance by the end of 2018, since additional growth in the U.S. and other countries outside OPEC, delayed the process of reducing inventory. However, a steady increase of oil prices has renewed the interest of companies to the exploration and led to the growth of investment in the industry.
The forecast oil prices for the year 2018
OPEC raised the forecast of oil production in countries outside OPEC in 2018 to 59,26 million barrels per day, the increase will occur mainly due to production growth in the United States. It also expected production growth in Canada, Brazil, UK, Kazakhstan, Ghana. Oil production in 2018, according to the OPEC, will be reduced in Russia (to 10.98 million barrels per day), China, Mexico, Norway and Colombia. Assessment of OPEC, OECD commercial stocks fell in December 2017 of 22.9 million barrels and amounted to 2 888 million barrels, which at 109 million barrels higher than the five-year average inventory level.
Oil exports from Saudi Arabia in March 2018 total less than 7 million barrels per day. Total reserves of oil and oil products in the United States on 9 February 2018 declined by 2.3% and amounted to 1872,4 million barrels. Crude oil inventories last week rose by 1.8% compared to the same date last year, gasoline inventories increased by 3.6% and distillate stocks by 3.9%. As of February 9, 2018 oil stocks in Cushing continued to decline and amounted to 32.7 million barrels vs 36.3 million barrels last week and 64,6 million barrels a year ago.
The main reason for the sharp drop in stocks called the launch of a new pipeline from Cushing to Memphis, the so-called “Diamond pipeline”, which began operation in December 2017 with Full capacity pumping is around 190 million barrels a day. Also nedoponyal flows TransCanada Keystone pipeline, halted due to the oil spill in November in South Dakota.
Less oil is directed to the North of the USA, more comes in from the Gulf of Mexico is about 0.6-0.7 million barrels per day from the Permian basin. Stocks on the coast increased by 1.7% since the beginning of November 2017 has Intensified the talks about the transfer of delivery for WTI to Houston.
Offshore oil port Louisiana (LOOP), the largest private terminal in the United States, launched in test mode, the loading and unloading of the tanker class VLCC. According to analysts, the growth of oil exports from the US to 3.5-4.0 million barrels per day port operators can face the problem of overload, and the tankers will have to stand in queues.
Despite the increased flow of oil into the Gulf of Mexico, in General, there is a drop of oil flows, which partly explain the seasonality of refinery operations. The strategic reserve continues to grow, despite the sales strategy of the White house. Stocks in the strategic reserve has grown by 0.4% last week and amounted to 665,6 mln.barrels.
According to Baker Hughes, as of February 9, 2018 the number of oil wells in the United States increased by 26 units to the previous week and amounted to 791 591 unit vs unit at the same date in 2017.
Evaluation of U.S. Department of energy in March 2018, oil production will increase to 6.76 million barrels a day, the bulk of the production falls on the Permian basin. Producers of shale oil drilled 1 246 wells and completed drilling 1 125 wells in major shale basins in January 2018, bringing the total number of drilled but uncompleted wells reached 7 609 units, what was the maximum 2013..
Analysts at Simmons & Co has slightly lowered the forecast of the average number of installations for drilling of oil and gas to 1002 units in 2018 and 1 128 units in 2019.
Shanghai futures exchange March 26-28, 2018 plans to launch trade in futures (contract INE) of crude oil varieties of Medium-sour with a density of 32 and a sulfur content of 1.5%, the contract size 1,000 barrels is assumed. The place of delivery will be linked to storage facilities in Dalian, Qingdao, Yangshan and Zhoushan, with a total storage capacity of 19.8 million barrels. Three reserve zones will be in Dalian, Yingkou and Yantai.
The Russian market of oil and oil products
In the past period fuel prices in the domestic market were mostly older, with the exception of decreased prices for fuel oil summer diesel fuel. The price of oil URALS on SPICEX decreased to $of 60.56. The price of oil URALS in rubles is 3704,8 rubles per ton. Export duties on oil and oil products from Russia in March 2018, on average, will decrease by 1%. Differentials for URALS fell to a minimum from September 2016 to $2,15 in connection with sluggish demand and high level of competition from alternative middle Eastern varieties. However, the expected increase in discounts in connection with the expected reduction in the supply of oil from the Russian oil refinery in March 2018, According to the energy volume pererabotki oil at the refinery in March may decline by 0.5% to 1,196 million tons.
Delivery of ESPO oil to China in January 2018 rose to 2.41 million tonnes, which is 66% higher than a year ago. Import growth occurred after entering into service as from 1 January 2018, the pipeline from the border town of Moss to Daqing with a total pumping capacity of 15 million tons per year. Crude oil exports CPC Blend BFO-CPC of the Black sea in March is 5.37 million tons compared to 4.39 million tons in February 2018 Exports of ESPO oil from the port Kozmino in April-June 2018 is expected to reach 7.5 million tonnes against 7.2 million tonnes shipped in the first quarter of 2018 Award for the supply of ESPO fell to $4.