oil prices

On Monday, oil prices were steady in trading, despite rising US production. Staoil photo.

Major factor in oil prices for 2018 will be OPEC v. shale: Analyst

Oil prices were steady on Monday as analysts and investors weighed political concerns in Iran and Saudi Arabia against rising US oil production.

“Oil prices are finely balanced in today’s trading session. Ongoing protests in Iran, together with recent detention of several princes in Saudi Arabia, have reinvigorated geopolitical concerns,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics told Reuters.

”However, prospects for further increases in U.S. oil production amid recent improvements seen in oil prices continue to promote bearish sentiment,” Kumar said.

By 1 p.m. EST, Benchmark Brent was up 3 cents to $67.65/barrel and US WTI rose 7 cents to $61.51/barrel.  Last week, Brent and WTI hit their highest levels since May 2015.  The Canadian Crude Index was steady at $39.14.

Data from the US Energy Information Administration shows crude production in the US is expected to top 10 million barrels per day (b/d) soon, mostly due to rising shale oil production.

The U.S. oil price is now into a range that is anticipated to attract increased shale oil production,” Ric Spooner, chief market analyst at CMC Markets told Reuters.

“Traders may decide that discretion is the better part of valour while markets wait on evidence of what happens to the rig count and production levels over the next couple of months,” Spooner said.

On Friday, Baker Hughes reported the number of oil rigs in the United States fell by five in the week ending Jan. 5.

“The OPEC versus shale debate will rage” in 2018 and will be a key price-driving factor, Stephen Innes told Reuters.  Innes is head of trading for Asia/Pacific at futures brokerage Oanada in Singapore.

According to a Reuters’ source, OPEC is monitoring the political unrest in Iran, as well as the economic crisis in Venezuela.  The source says the cartel will only boost output if there are significant and sustained production disruptions in those two countries.

Innes says uncertainty in the Middle East will remain a key focus for oil markets and could “send oil prices rocketing higher”.