Recap: Oil prices continued to move higher, with WTI trading at its highest level for a spot contract in 18-months and for the first time in over a year, the February contract settled above $54 a barrel. Spot WTI settled at $54.06, up 16 cents, or 0.30%, while its European counterpart gained 13 cents, or 0.23%, to settle at $56.22 a barrel.
Trading remained quiet ahead of the new year, and as of 4:43 pm, February WTI traded 306,000 contracts.
While the proposed output cuts are to take effect on Jan 1, it will take some time before the market realizes any such cuts. This is once again evident in the Dec17/Dec18 WTI spread, which has been steadily moving deeper into backwardation. Prior to the proposed cuts, this spread was trading at -$2.00, and is currently trading at 76 cents premium to the Dec17.
January RBOB rose 2.18 cents, or 1.3%, to finish at $1.6746 a gallon, the highest since Aug. 14, 2015. January heating oil settled at $1.6993, down .0001.
Fundamental News: Iraq's Oil Minister, Jabar Ali al-Luaibi, said his country will cut supply by 200,000-210,000 bpd starting in January. He also stated that he saw oil prices rising to $60/barrel as the cuts would help ease the global oversupply of the past three years.
Iran's Oil Minister, Bijan Zanganeh, said he expects OPEC to abide by the deal to cut production.
Kuwait's Oil Minister, Essam Al-Marzouq, said preparations are underway to hold the first meeting of the committee responsible for monitoring compliance of the OPEC deal in Vienna on January 21-22. In addition to Kuwait, which heads the committee, members include Algeria, Venezuela, Russia and Oman.
Russian Finance Minister, Anton Siluanov, said a price of $45/barrel of oil was balanced for both suppliers and consumers. He stated that budget revenues from oil and gas sales had fallen by 18% this year due to weaker prices.
US oil and gas companies are seeing their credit limits expand for the first time in two years as improving oil prices increase the value of their reserves against which banks lend. Oil and gas companies that have so far announced the results of a biannual revision of borrowing limits, report an average increase of about 5% in credit lines or more than $1.3 billion. The combined bank credit for the companies stood at $30.3 billion, compared with $28.9 billion at the end of spring 2016. US shale drillers are set to increase spending on exploration and production next year. While the credit increase is small, US-based shale drillers are looking to increase their market share to take advantage of higher prices and greater availability of capital will make that easier.
Egypt's Oil Minister, Tarek El Molla, signed three offshore oil and gas exploration and production deals worth a total of $220 million with France's Total, Britain's BP and Italy's Eni's Egyptian subsidiary IEOC. The deals include drilling for six wells and a signing bonus of $9 million.
Russia's Transneft said oil loadings from the Russian Pacific port of Kozmino have been suspended due to a storm. It said weather conditions are expected to improve later on Wednesday.
Imports of crude oil by Iran's four major buyers in Asia in November more than doubled for a second consecutive month from a year ago. China, India, South Korea and Japan imported 1.94 million bpd in November, up 117% on the year.
Early Market Call - as of 9:00 AM EDT
WTI - Feb $54.90, down 5 cents
RBOB - Jan $1.6990, up 2.44 cents
HO - Jan $1.7093, up 1 cent
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