Month: January 2019

Oil prices continue to hover in the low $50s in the US and low $60s in London – about where they have been since early January. The main issue affecting prices remains the efficacy of the OPEC+ production cut vs. US shale oil production and the slowing Chinese economy. Last week a political upheaval occurred in Venezuela, raising the possibility that Caracas would no longer be able to export 500,000 b/d to the US or that its production might fall below its current 1 million b/d level. So far, the Venezuelan turmoil has not moved oil prices, but with the world’s major powers lining up for or against the Maduro government, prices seem likely to be affected.

Oil prices continue to climb steadily closing up about $3-4 a barrel by the end of last week. Behind the move are concerns that US shale oil production this year may not be as strong as forecast; lower OPEC production; and reports that the US and China are making progress towards ending their trade war. New York futures closed at $53.80 on Friday, while London closed at $62.70. This leaves London’s Brent about $12 a barrel higher than it was at the end of December, but $22 lower than it was in September. These prices should make the OPEC exporters happier but may not be high enough to keep shale oil production increasing as fast as predicted.

Oil prices continued to climb last week and are now some $10 a barrel higher than they were just before Christmas when recent lows were set. Prices now have retraced about 30 percent of the $35 a barrel drop that took place between late September and late December. Part of the recent price correction likely is due to technical factors such as closing out long positions in the futures markets. The news that the Saudis will cut even more production than specified in their recent pledge in hopes of raising world prices to $80 a barrel was an important part of last week’s price jump. Hopes that the US and China would settle their trade dispute during on-going talks was also an important factor in the recent price jump.

Since hitting a recent low on Dec 22nd, oil prices have climbed by $5-6 a barrel as the markets tried to sort out where supply and demand are going. With US oil prices still below $50 a barrel, it is hard to imagine that the optimistic forecasts for US shale oil production will be reached in 2019. There are continuing indications that China’s economy is headed for a dip, but there are reports that US/China trade negotiations are making progress. The US sanctions on Iran seem to be hurting Tehran’s exports, and the OPEC+ production cut is slow getting off the ground.