Oil near June 2015 high as production cuts tighten market
U.S. West Texas Intermediate (WTI) crude futures were at $58.50 a barrel at 0141 GMT, up 3 cents from their last settlement.
Brent crude futures, the international benchmark for oil prices, were at $65.25 a barrel, unchanged from their last close, but near the $65.83 per barrel briefly on Dec. 12 – the highest since June 2015.
Brent has risen by 47 percent since mid-2017. The Organization of the Petroleum Exporting Countries (OPEC), the Middle East-dominated producer club, and Russia – the world’s single biggest oil producer – have been withholding output in order to tighten the market and prop up prices
The greement to cut started last January and is set to cover all of 2018.
Jabar al-Luaibi, oil minister of OPEC-member Iraq, said on Monday there would be a balance between supply and demand by the first quarter of 2018, leading to a boost in oil prices.
“During the first quarter of next year there will be more balance between supply and demand, which will reflect positively on improving global oil prices,” he said.
Keeping a lid on prices for the moment is the expected return of the Forties pipeline system in the North Sea, which can supply up to 450,000 bpd of crude underpinning Brent futures.
The pipeline shut down earlier in December due to a crack, but operator Ineos said the system was being tested following repairs and full flows should return in early January.
In the longer term, efforts by OPEC and Russia efforts to prop up prices could also be undermined by U.S. production, which has soared by more than 16 percent since mid-2016, fast approaching 10 million bpd.
Only OPEC king-pin Saudi Arabia and Russia produce more, but the United States is fast catching up, largely thanks to shale drillers.
The U.S. rig count, an early indicator of future output, held at 747 in the week to Dec. 22, according to the latest weekly report by Baker Hughes. That’s still much higher than a year ago, when only 523 rigs were active, and most analysts expect U.S. output to rise past 10 million bpd within weeks.