March 2018 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil nudged higher in March, increasing by $0.49 (+0.8%), to $62.72 per barrel. The advance coincided with a modestly stronger U.S. dollar, the lagged impacts of a 379,000 barrel-per-day (BPD) jump in the amount of oil supplied/demanded during January (to 20.5 million BPD), and nearly static accumulated oil stocks (monthly average: 428 million barrels). 

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From the 2April 2018 issue of Peak Oil Review:

* While rising geopolitical concerns -- declines in Venezuela and fears that the U.S. will step up the confrontation with Iran -- are pushing up crude prices, the rapid increase in US shale oil production is keeping a lid on prices.

* A new Reuters poll suggests that oil prices are likely to rise this year thanks to supply disruptions and the extension of the OPEC-led deal to limit production, but doubts over the future of compliance with the OPEC agreement and rising U.S. production could stem the upward momentum.

* In recent months there have been rumors that OPEC and Russia are looking at ways of establishing some form of permanent cooperation that would extend beyond the current production cut agreement. Last week Reuters reported that Russia and OPEC are working on a much more ambitious long-term understanding. In an interview, Saudi Crown Prince bin Salman said “We are working to shift from a year-to-year agreement to a 10 to 20-year agreement.” “We have agreement on the big picture, but not yet on the detail.”

* Several oil exporting countries recently have talked about a six-month extension to the oil supply cut deal taking the production freeze into 2019.  These statements suggest that OPEC is not ready to ease up or eliminate the production caps, with top officials signaling a desire to keep the cuts in place into next year. 

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From Oilprice.com’s 30 March 2018 issue of Oil & Energy Insider:

* OPEC and Russia consider 10- to 20-year alliance. There have been rumors for some time that OPEC and Russia are looking at ways of institutionalizing their cooperation beyond the current production cut agreement, which may or may not expire at the end of this year. Reuters reported this week that they are working on something much more ambitious than previously thought: OPEC and Russia are looking at solidifying their cooperation for the long-term. “We are working to shift from a year-to-year agreement to a 10 to 20 year agreement,” Saudi crown prince Mohammed bin Salman told Reuters in an interview on Monday. “We have agreement on the big picture, but not yet on the detail.”

* OPEC/non-OPEC looking at six-month extension. OPEC and its non-OPEC partners are reportedly considering an extension of the current production cut agreement for six months, through mid-2019, according to Iraqi oil minister Jabbar al-Luaibi. “By the end of this year, we will assess and decide how to go ahead,” he said at the Iraq Energy Forum. “Some are suggesting a three-month extension, some suggest a six-month extension.”

* China moves to purchase oil with yuan. Fresh off the launch of its yuan-denominated oil futures contract, China is reportedly preparing to make some oil purchases later this year in yuan instead of dollars. It would be a shot across the bow as China hopes the yuan will rival the greenback as a global currency. Because oil is the world’s most traded commodity, shifting part of the oil trade to yuan would have enormous ramifications. "Being the biggest buyer of oil, it's only natural for China to push for the usage of yuan for payment settlement. This will also improve the yuan liquidity in the global market," a source told Reuters.

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.