The man who called crude's collapse three years ago now sees this

Sean Reid
December 30, 2017

Unlike the recently slowing increases in US exports of crude oil, distillate fuel, and motor gasoline, propane export growth has accelerated. By comparison, production is now only higher in Russian Federation and Saudi Arabia.

US output has surged overall this year, hitting a 46-year high in October when producers pumped 9.6 million barrels a day, according to federal data.

The price increase also follows a decision by the Organization of the Petroleum Exporting Countries to extend its agreement on production limits through 2018. Propane has many non-transportation sector end uses, including as a fuel for heaters and cookstoves and as a feedstock for petrochemical industry.

The net-long position on WTI increased 7.3 per cent to 411,972 futures and options during the week ended Dec 26, according to data from the US Commodity Futures Trading Commission on Friday.

OPEC and its partners chose to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry. The February contract expired Thursday, after rising 28 cents to $66.72. Concern that Opec's efforts weren't enough and would end abruptly in March 2018 led short-sellers to dominate the scene for several months, with WTI plunging to the low-US$40s in June.

US crude oil closed above $60/bbl for the first time in two-and-a-half years, settling up 1% at $60.42 as a combination of supply disruptions this week and evidence of reduced crude inventories has helped push prices higher headed into 2018.

Gasoline stocks rose by 591,000 barrels, compared with analysts' expectations in a Reuters poll for a 1.3 million-barrel gain.

"We see USA supply continuing to grow next year but are less concerned about a sudden supply glut re-emerging as rising D&C (drilling and completion) costs will likely slow production growth", said Ashley Petersen of Stratas Advisors.

Another possible risk for oil prices in the new year: President Donald Trump's trade agenda. Supportive equities, with DOW hitting another record high also kept oil elevated.

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