Oil Price Toys With $62 Amid Iranian Friction, US Drilling Pullback

Violet Powell
January 9, 2018

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

Meanwhile, traders kept a close eye on the political tensions in Iran.

Crude oil prices fell Friday, dropping from highs last seen in 2015, as soaring USA production undermined a 10% rally from December lows that were driven by tightening supply and political tensions in OPEC member Iran, Reuters reported.

The Iran situation "has the market a bit on edge", said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund.

Oil had its strongest opening week for any year since 2013 last week as U.S. stockpiles continued to shrink and amid output curbs by the the Organisation of Petroleum Exporting Countries (Opec) and its allies.

Gas prices jump 15 cents at Mobil Guam, 76
The average price of a gallon of regular-grade gasoline jumped 3 cents nationally over the past three weeks to $2.54. The Massachusetts price is one cent below the national average for regular unleaded of $2.49.

"The risk at this point is somewhat to the upside, particularly if we continue to see weak drilling numbers in the United States", Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone.

Brent futures gained 16 cents, or 0.2 per cent, to settle at US$67.78 (RM270.92) a barrel, while US West Texas Intermediate (WTI) crude rose 29 cents, or 0.5 per cent, to settle at US$61.73. Total volume traded was about 11 percent below the 100-day average.

OPEC is closely following the protests in Iran and the economic struggles of Venezuela, but the cartel will not intervene in the market by ramping up supply unless significant prolonged production disruptions in those two countries occur, Reuters reported on Monday, citing a senior OPEC source from a major Middle Eastern producer. USA commercial crude oil inventories decreased by 7.4 million barrels from the previous week, the EIA said in a weekly update. The rig count eased by five in the week to January 5 to 742, according to data from oil services firm Baker Hughes.

USA explorers spent the final six weeks of 2017 in a virtual standstill, adding just as many rigs as they laid off. Bowing to heightened investor pressure, drillers are seeking to do more with less in a bid to boost profits. US production rose to 9.78 million barrels in the last week.

Oil prices have received general support from production cuts led by OPEC and a group of non-OPEC producers led by Russian Federation, which started last January, and are set to last through 2018, as well as from strong economic growth and financial markets. To contact the reporter on this story: Jessica Summers in NY at jsummers24@bloomberg.net. All comments are subject to editorial review.

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