Oil prices up slightly Friday

Oil prices rose slightly on Friday and are on track for a fourth straight week of gains, but fell short of a three-year high posted on Thursday.

By 12:40 p.m. EST, Brent crude had risen 16 cents to $69.42/barrel and was on track for a 2.3 per cent gain for the week.  US WTI was up 14 cents to $63.94/barrel, on track for a 3.5 per cent boost this week.  On Thursday, WTI touched $64.77/barrel, its strongest level since December 2014.

The Canadian Crude Index was up 5 cents to $40.77.

“If you look at any kind of momentum indicator this is telling you this is way overbought,” Robert Yawger, director of energy futures at Mizuho told Reuters. “However, there are definitely issues supporting the market.”

The oil market was buoyed by a reduction in US crude inventories, a surprise reduction in US crude output, the continuation of the OPEC supply cut agreement as well as steady demand.

In the week ending Jan. 5, US commercial crude stocks closed in on five-year averages as they reportedly fell to 419.5 million barrels.

With oil prices on the rise, Vagit Alekperov, Chief Executive at Lukoil, said Russia should begin exit proceedings from the OPEC deal if crude prices remain steady at $70/barrel for more than six months.

According to Reuters, a number of major oil-producing countries are concerned that as oil prices rise, shale producers in the US will boost their output which could flood the market with crude. OPEC countries see US shale cutting into their market share.

Despite this, a senior OPEC source told Reuters that Gulf OPEC producers will honour their production reduction pledges even though demand is on the rise and global inventories are dropping.

On Friday, Baker Hughes released its weekly rig count showing the number of oil rigs in the US had risen by 10 to 752.  This is up by 230 since this time last year. In Canada, the oil rig count is up a whopping 87 rigs to 185.  The number of oil rigs in Canada at this time last year was 170.

Data from the US Energy Information Administration released Wednesday showed US crude production fell by nearly 300,000 barrels to about 9.5 million barrels last week.  The decline is attributed to the recent cold snap in the continental US and is expected to be short-lived.

The EIA forecasts US crude production to pass 10 million b/d in the coming months and could top 11 million b/d by 2019.

Photo courtesy Encana.