Economy

US Shale, End Of OPEC Cuts Could Stifle Oil Prices In 2018

US Shale, End Of OPEC Cuts Could Stifle Oil Prices In 2018

On Wednesday, November Brent futures LCOX7, -0.41% were off 6 cents, or 0.1%, at $57.86 a barrel on ICE Futures Europe.

Prices rose after Turkish president Tayyip Erdogan made a veiled threat to close the pipeline that allows Kurdish oil to reach the global market.

According to the Financial Times, Kurdish exports have risen strongly since 2014, which has allowed the Kurdistan Regional Government to plan for independence from Iraq, despite resistance from the US, Turkey and Iran. A market surplus a year ago pushed crude oil prices to historic lows, slowed capital streams toward exploration and production and hurt the financial well-being of producers and producing states alike.

USA crude oil stockpiles shrank last week as refinery activity continued to recover following recent hurricanes.

Crude oil prices rallied Monday, with Brent hitting its highest level in two years and West Intermediate Texas (WTI) futures rising to their biggest price in about five months, amid strong demand and a bet the oil output cut will be extended next year. The Russian energy minister said OPEC did not agree on a freeze beyond March 2018, making it a key date for the oil industry.

Gasoline inventories probably dropped by 750,000 barrels, while distillate supplies likely shrank by 2.05 million barrels, according to the Bloomberg survey.

Preliminary weekly figures show production at roughly 9.5 million barrels a day in the week through September 15, recovering after a brief dip due to impacts from Hurricane Harvey.

"The highlight from today's EIA report isn't the larger-than-expected draw to stocks, but the reported cause of this draw", said Troy Vincent, oil analyst with Clipper Data.

The market is increasingly focused on the demand outlook, after the International Energy Agency and OPEC both raised their forecasts for global oil consumption, analysts tell CNBC.

The price of oil is trading around its highest level in over two years, spurred by Turkey's threat to cut crude flows from Iraq's Kurdistan region, triggering fears that motorists in the United Kingdom could soon face a fresh rise in prices at the pump.

Technological improvements and greater efficiency has helped US shale producers pump out crude oil at lower margins - some say it is now profitable at less than $50 per barrel.

Oil prices were trading at multi-month highs on Monday, continuing a rally that brought Brent crude within $1 of its 2017 high. USA inventories fell by 761,000 bbl last week, the American Petroleum Institute was said to report. New orders for nondefense capital goods excluding aircraft, which is a proxy for business investment, rose 0.9% in August after a 1.1% gain in July.