On Thursday, US oil prices gained almost 2 per cent. In January, both Brent and WTI increased for a fifth straight month. Apache photo.
Oil prices rose as falling output in Venezuela offset higher production in Nigeria, Saudi Arabia
Oil prices rose on Thursday as data showed participants in the OPEC supply cut agreement are honouring their reduction pledges and despite US production rising beyond 10 million barrels per day (b/d) for the first time since 1970.
By 5:13 p.m. EST, Brent crude had risen by 83 cents to $69.72/barrel and US WTI was up 1.92 per cent to $65.97/barrel. Both Brent and WTI rose for the fifth straight month, with Brent up 3.3 per cent and WTI up 7.1 per cent in January. According to Reuters, this marks the strongest start to a year for Brent in five years and WTI in 12 years.
The Canadian Crude Index $1.12 to $36.15.
“Oil is up today because of OPEC’s reinforced commitment for 2018,” Brian Kessens, a portfolio manager and managing director at Tortoise told Reuters.
OPEC countries Nigeria and Saudi Arabia both posted higher output in January, however, a sharp decline in Venezuelan production was a factor in a strong compliance report for the OPEC supply cut agreement.
“The OPEC compliance for January was elevated but there are real questions going forward given the outsized participation of Venezuela,” John Kilduff, partner at energy hedge fund Again Capital LLC told Reuters.
An economic, political and social crisis has decimated Venezuela and has also led to a drop in crude production to 1.6 million b/d in January.
Meanwhile, US production is booming. The Energy Information Administration reporting crude output in the United States surpassed 10 million b/d in November for the first time since 1970.
“We expect U.S. crude oil output to grow in 2018 at nearly a million b/d more than last year. Buckle up, because the United States is on track to become the largest oil producer in the world by the end of this year,” Kessens at Tortoise told Reuters.
Another factor in rising oil prices was a note from Goldman Sachs which boosted their oil prices target. Its three month forecast for Brent moved to $75 from $62 and its six-month forecast goes from $75 to $82.50.
However, a survey by Reuters suggests that oil prices are unlikely to rise much over $70/barrel in the coming year due to rising US production.