Brent Crude Rises but Set for First Yearly Drop Since 2015

By Julia Payne
Monday, December 31, 2018

Oil prices rose more than 2 percent on the final day of the year, mirroring gains in stock markets, but were on track for their first annual decline in three years as concerns of a persistent supply glut lingered.

Hints of progress on a possible U.S.-China trade deal, with U.S. President Donald Trump saying he had a "very good call" with Chinese President Xi Jinping, helped bolster sentiment for oil.

Brent crude futures were up 75 cents at $53.96 a barrel by 1357 GMT but rose over $1 to a high of $54.82 in earlier trade.

U.S. West Texas Intermediate (WTI) crude futures were at $45.90 a barrel, up 57 cents. In earlier trade, WTI was up over $1 at $46.53 a barrel.

Both contracts are down more than a third this quarter, the steepest decline since the fourth quarter of 2014.

For most of 2018, oil prices were on the rise, driven up by healthy demand and supply concerns, especially around the impact of renewed U.S. sanctions against major producer Iran, which were introduced in early November.

Brent crude, seen as a global benchmark for oil prices, rose by almost a third between January and October, to a high of $86.74 per barrel.

That was the highest level since late 2014, the start of a deep market slump amid bulging global oversupply, and many leading analysts and traders at the time said they expected crude to hit $100 per barrel again by the end of 2018.

Instead, Brent prices have wiped out all of 2018's gains, plunging by almost 40 percent from the year's high, in what has been one of the steepest oil market sell-offs of the past decades.

The slump came after Washington gave unexpectedly generous sanction waivers to Iran's biggest oil buyers and as concerns over a global economic slowdown amid the Sino-American trade dispute dented the outlook for oil demand.

"It was the bailout of Iran that really pricked the bubble that was the crude oil market," said Sukrit Vijayakar, director of energy consultancy Trifecta.

"For the immediate future, in the absence of anything new, the first pressure point for oil markets would come around May 2019 or a month or so earlier when the 'extensions of (Iran)waivers' would be discussed."

A Reuters poll showed a bearish 2019 outlook on Monday. A survey of 32 economists and analysts forecast an average Brent price of $69.13 a barrel next year, compared with $71.76 in 2018.

The current downward pressure on oil prices should likely taper off from January, analysts said, as the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia start curbing production by 1.2 million barrels per day (bpd).

The market, however, might still remain under some pressure from swelling production in the United States, which has emerged as the world's biggest crude producer this year, pumping 11.6 million bpd.

"The key swing producers within OPEC+ do have meaningful spare capacity and are able to use it if they deem it necessary. That said, it is nonetheless a difficult tool to use correctly in a world where forecasters tend to routinely underestimate U.S. production by several hundred thousand barrels per day," JBC Energy consultancy said in a daily note.

Outside the United States, production in Russia and Saudi Arabia also hit record levels this year. 

(Reuters, By Julia Payne, Reporting By Koustav Samanta and Henning Gloystein in Singapore, Editing by Adrian Croft and Kirsten Donovan)

Categories: Shale Oil & Gas

Related Stories

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

Petronas Expands Suriname Portfolio with Deepwater Block Acquisition

Japanese Oil and Gas Firm Enters Two Blocks off Malaysia

Yinson Production, “K” LINE Target Europe's CCS with FSIU and LCO2 Solutions

Woodside Agrees Long-Term LNG Supply with Petronas Unit

Petronas-Eni Upstream Joint Venture to Take Up to Two Years to Set Up

CNOOC Starts Production at Offshore Field in South China Sea

MODEC, Carbon Clean to Advance FPSO-Mounted Carbon Capture Tech

Aker Solutions, PTAS JV Hooks Brownfield Services Extension off Brunei

Azeri SOCAR Plans New Agreements with Oil and Gas Majors

Current News

One Shelf Drilling Rig Up for New Job in India, Other for Disposal

Four Jack-Up Drilling Rig Deals Set to Bring In $129M for Borr Drilling

PTTEP Hires Velesto’s Jack-Up Rig for Drilling Campaign off Malaysia

Yinson Production Secures $1.17B Refinancing for FPSO Maria Quitéria

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

Petrovietnam, Partners Sign PSC for Block Off Vietnam

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

CNOOC Signs Hydrocarbons Exploration and Production Deal with Kazakhstan

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Woodside and Jera Agree LNG Cargoes Supply for Japan’s Winter Period

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com