January 2018 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil moved higher for a seventh consecutive month in January, increasing by $5.82 (+10.1%), to $63.70 per barrel. The advance coincided with a dramatically weaker U.S. dollar, the lagged impacts of a 472,000 barrel-per-day (BPD) rise in the amount of oil supplied/demanded during November (to nearly 19.9 million BPD), and a leveling-off of accumulated oil stocks (at 420 million barrels). 

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From ASPO-USA’s February 5, 2018 Peak Oil Review:

“After the best January in 12 years, the oil markets declined slightly last week as a stronger dollar and crashing equity markets offset surging US shale oil production, and steadily increasing US rig counts. According to EIA estimates, US crude production broke through 10 million b/d last week and is on its way toward setting an all-time US production record. Major US banks have accepted that the OPEC production cut is working and that the global oil glut is being cleared. Goldman's is talking about oil prices reaching $80 a barrel in the next six months while others are talking about prices exceeding $100 a barrel again.

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“The future path of oil prices still has much to do with how well US shale oil production does in the next few years. In the long run - 20 or 30 years - the world is still using more oil than it is finding so that someday shortages will develop along with significantly higher prices.

“The OPEC Production Cut: There now is general agreement that the OPEC production cut was a success.  Oil prices are moving steadily higher, and excess stocks are being eliminated. Most of the thanks for this success goes to the Saudis who did more than their fair share in cutting production and Venezuela, whose crude production is collapsing of its own accord. Although Moscow made a major contribution to the success of the effort, it waited until its production could be pushed up to a recent high before declaring the base from which its production would be cut. Adherence to the deal rose to 138 percent from 137 percent in December.

“When the price of Brent climbed to about $70 a barrel recently, there was talk of ending the production freeze this summer rather than waiting until the end of the year. It did not take long to figure out that any announcement of an early end to the agreement would instantly send oil prices lower, probably hurting OPEC more than US shale oil drillers.” 

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From Oilprice.com’s February 2, 2018 Oil & Energy Insider:

“Oil prices seesawed over the past few days, but look poised to close out the week flat compared to last week. High OPEC compliance and falling Venezuelan production more or less offset surging output from U.S. shale and an uptick in inventories.

“U.S. oil production tops 10 mb/d. The EIA said this week that U.S. oil production surpassed 10 mb/d in November, just shy of the all-time high set decades ago. There was a huge increase from October, a monthly increase of over 380,000 bpd. The surging output is clear evidence that the shale industry is ramping up production at an amazing pace, and could spoil OPEC's plans to balance the market. Meanwhile, U.S. crude inventories also jumped last week, the first time that has occurred in several months.

“Goldman: Brent to $82 in 6 months. Goldman Sachs dramatically overhauled its forecast for oil prices this year, stating in a research note that the market is tightening much faster than expected. Moreover, the investment bank said that OPEC's objective of bringing down inventories to the five-year average has probably already occurred. "The rebalancing of the oil market has likely been achieved, six months sooner than we had expected." The bank predicts that OPEC will stick with the cuts for the first half of the year, which could tighten the market more than the group intends, and push prices up above $80 per barrel by the summer. From there, OPEC might gradually ratchet up output.

“OPEC compliance rate at 138 percent. OPEC maintained high levels of compliance with the production cuts in January, with its compliance rate at 138 percent according to Reuters. However, that is largely the result of the meltdown from Venezuela, which offset the gains from Saudi Arabia and Nigeria.

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.