February 2017 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil pressed higher ($0.94 or 1.8%) in February, to $53.44 per barrel. The increase coincided with a weaker U.S. dollar, the lagged impacts of a 324,000 barrel-per-day (BPD) rise in the amount of oil supplied/demanded in November (to 20.0 million BPD), and a new record of over 520 million barrels of accumulated oil stocks. 

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Futures traders appear to be questioning the potential for higher prices, especially in the wake of bearish data releases from the Energy Information Administration (EIA). Besides the record crude inventories mentioned above, U.S. oil production figures jumped to 9.032 million BPD during the last week of February. Moreover, preliminary data indicate flagging U.S. demand for gasoline; since late January, gasoline demand has been running 5-6% lower YoY, according to the EIA's weekly estimates. “Historically, that sort of drop has only happened when there’s been a recession or a huge spike in prices,” observed Bloomberg.com columnist Liam Denning.

“Data for February is in,” wrote Oilprice.com Editor Evan Kelly, “and it shows that OPEC increased its compliance rate. Saudi Arabia took on the additional burden, cutting deeper than it promised as part of the November deal. The oil kingdom cut output by 90,000 bpd in February from January levels, taking output down to 9.78 million barrels per day. Reuters puts the compliance rate at 94%, while Bloomberg has it at 104%. Saudi Arabia is making up for a handful of countries that are falling short on their commitments, including Iraq, the UAE, Angola and Venezuela. Plus, this does not take into account rising output from Libya, Nigeria and Iran. When included, OPEC is producing 415,000 BPD above its target. Moreover, Russia has not slashed its production beyond the 100,000 BPD reduction in January.”

“With the rig count continuing to rise, estimates as to how much U.S. shale oil production will increase this year are popping up all over the financial press,” wrote Peak Oil Review Editor Tom Whipple.  “Some expect U.S. oil production to increase this year by 400,000 BPD while others are talking about a million. The EIA says U.S. oil production is already up by 400,000 BPD in the last six months. Most of this production is coming from newly opened off-shore production that was started many years ago and had too much money invested to slow during the recent price collapse.”

“If U.S. producers can increase production by anything close to 1 million BPD this year and if the Libyans manage to get their production back to anywhere near pre-uprising levels, we could see prices in nearly the same trading range or lower by the end of the year,” Whipple concluded. Predictions range all over board regarding prices later this year -- from the $30s to the $70s.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.