From the Field
A good year for oil
NEW YORK, December 30, 2016 – Brent and West Texas Intermediate futures, both near yearly highs on Friday, have not had a better year since 2009.
Prices are on track for the largest annual increase in seven years, as analysts’ concerns about the implementation of the output cut deal among major producers appeared to ease, Reuters reported on Friday, noting that another key factor for the rise of oil prices has been the projected growth of demand.
Nevertheless, many uncertainties remained.
“We see a big variation in demand growth assessments for 2017, ranging from +1.22 million [bopd] … to +1.57 million [bopd],” JBC analysis quoted by Reuters said.
“Overall, all forecasters agree that Asia will remain the main engine for demand growth. Yet, there is no consensus on the extent of Chinese and Indian year-on-year demand growth.”
US crude inventories grew by some 614,000 barrels in the week prior to December 23, EIA data showed, and were at a high for the time of the year at 486 million barrels.
“The main driver behind last week’s build was a slowdown in refinery activity,” S&P Global Platts told the Wall Street Journal. As refinery utilisation declined by half a percent to 91% of total capacity, petrol stock in the US went down by 1.6 million barrels, the newspaper added.
Though analysts surveyed by Reuters on Thursday predicted that oil would slowly climb toward USD 60 per barrel by year-end 2017, growing rig counts in the US and lingering concerns about implementation of the production cut deal have led many to forecast volatility in the second half of next year.
“Failure on OPEC and Russia’s part to deliver the promised cuts could trigger a 10% to 15% correction,” Ole Hansen, head of commodity strategy at Saxo Bank, told the Wall Street Journal.