September 2017 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil edged higher for a third consecutive month in September, increasing by $1.78 (+3.7%), to $49.82 per barrel. The advance coincided with a weaker U.S. dollar, the lagged impacts of a 474,000 barrel-per-day (BPD) drop in the amount of oil supplied/demanded during July (to 19.8 million BPD), and a stabilization of accumulated oil stocks (465 million barrels). 

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Several factors have sustained the summer uptick in prices, wrote ASPO-USA’s Peak Oil Review Editor Tom Whipple, including OPEC and the International Energy Administration releasing reports forecasting higher global consumption. The Kurd’s independence referendum which led to Turkey threatening to block Kurdish oil exports was another factor, as were the effects of the hurricanes in the Gulf of Mexico.

“The oil markets are being affected by a continuous stream of news that is suggesting prices will be going higher or lower,” Whipple continued. “These factors range from changes in supply and demand, the economic situations in numerous countries, to geopolitical upheavals and hurricanes. Over the next few years, the fundamentals say that the lack of sufficient investment in finding and developing new oil fields will push prices higher – possibly much higher. Much of the discussion is over just when this price increase will take place with some saying that the recent price surge was too much to be justified by fundamentals. Others say demand from Asia will grow so fast that it will even outrun optimistic forecasts for US shale oil production.” 

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“Is $80 oil possible?” asked Oilprice.com Editor Tom Kool. “There is quite a bit of disagreement about what happens next with oil prices. One notable call comes from Jodie Gunzberg, head of commodity and real asset indices at S&P Dow Jones Indices, who told CNBC that $80 is possible. She argued that Hurricane Harvey ignited a bit of bullishness from the outages, which could propel oil prices up in the coming months. "When we look at the index data, we can see the price could move even as high as $80 to $85 (a barrel). Not immediately, but with their structural backwardation and shortages in the market, you just can't replenish it overnight,” she said. "It is now in a bull market, Brent is up about 30% since June and we also had WTI up 23%."

Meanwhile, refined product exports are rebounding as Gulf Coast refineries come back online after being shuttered in response to Harvey. That has eased the pressure on gasoline and diesel markets, pushing down margins that had spiked a few weeks ago.

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.