Oil starts the year strong as Brent crude crosses $67

Oil prices started the year on a positive note on Tuesday, logging the highest January opening since 2014, as markets continue to tighten driven by OPEC and Russia-led production cut deal.

International benchmark Brent crude was last trading up 0.5 percent at $67.18h per barrel (bbl), after having touched a high of $67.25/bbl earlier in the day. The West Texas Intermediate (WTI) crude futures were up 0.4 percent at $60.68/bbl.

Global oil markets have been buoyant over the past two months, after Organization of the Petroleum Exporting Countries (OPEC) and Russia announced that they will extend their output cut deal until the end of 2018.

“The expectation is that the market will continue to rebalance and global stock levels decline, but that this process will be gradual. Demand growth will be supported in 2018 by the solid global economy, but the price rally is incentivizing ever higher levels of US shale output,” National Bank of Kuwait said in a recent report.

“In our baseline, oil prices average $55/bbl in 2018 and 2019, unchanged from 2017,” it added.

The output cut agreement, which includes 24 countries, was signed in 2016 and came into effect in January 2017.  Initially a six-month deal, it was extended first until March 2018 and later until the end of this year.

The deal aims to cut 1.8 million barrels a day (bpd) from the market to ease oversupply and bolster oil prices.

According to OPEC’s latest outlook, global oil demand is expected to reach 1.51 million bpd in 2018. Meanwhile, the producers group expects inventories to continue falling, leading to a more balanced market.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com