The Bunker Review is contributed by Marine Bunker Exchange
OPEC announced it was leaving oil production levels unchanged last week Thursday. West Texas Intermediate crude prices traded through the psychological $70.00 per barrel level, dropping below $68, its lowest level since May 2010.
Although the market was trading lower going into Thursday’s important meeting, traders still reacted as if the decision was a surprise. Many had expected OPEC to agree to cut oil production to 29.5 million barrels a day from 30 million barrels currently, but this scenario never seemed to show up in this week’s price action.
Oil fell 18 percent last month as a result of OPEC maintaining its output target to let low prices force U.S. production to slow from a three-decade high. Kuwait’s oil minister said the group is acting to preserve market share amid a global supply glut, after resisting calls from members including Venezuela to reduce their collective quota at a Nov. 27 meeting in Vienna.
Now a week later West Texas Intermediate rose for a second day as investors weighed an unexpected drop in U.S. crude inventories against the prospect of sustained production from OPEC. Brent gained in London. Futures climbed as much as 1.3 percent in New York. Crude stockpiles shrank by 3.69 million barrels last week, the Energy Information Administration reported on Wednesday. Supplies were forecast to expand by 1.75 million, according to a Bloomberg News survey of analysts.
Iraq, the second-largest member of the Organization of Petroleum Exporting Countries, signed a deal with the Kurdish Regional Government that may add about 300,000 barrels a day to the global market. WTI for January delivery advanced as much as 84 cents to $68.22 a barrel in electronic trading on the New York Mercantile Exchange was at $67.91 at 3:50 p.m. Singapore time on Thursday. The contract increased 50 cents to $67.38 a barrel on Wednesday. Total volume was about 10 percent below the 100-day average. Prices have declined 31 percent this year.
The price action is showing signs of stabilization around current levels. The longer we hang around these levels, the more likely it is we will stay around these levels and eventually start to go higher for both WTI and Brent.
For the coming week we expect bunker prices to stabilize.
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)