Oil prices have performed strongly - BNZ

Analysts at BNZ note that crude Oil prices have performed strongly recently with spot Brent prices almost touching $60.

Key Quotes

“The price has reacted to Hurricane linked supply shocks, indications that OPEC and Russia are keen to extend the current production cuts agreement, and recent inventory data showing US stocks have resumed their fall from the recent record highs. The cheaper WTI crude prices (discounted US$5 versus Brent), have encouraged US exports to reach a record 2 million barrels per day, which is helping to reduce inventories.”

“The shape of the curve has also changed dramatically, from steep contango just one month ago, to being in steep backwardation off higher spot levels out to 2020, then in moderate cantango to the longer dates. Solid demand for refined products has forced refiners to bid very strongly for physical near dated crude stocks, which are in tight supply due to falling rig counts and seasonal maintenance in Asia and the North Sea. The longer dated prices suffer from producers encouraged to hedge their long term exposures.”

“Russian President has told an energy forum in Moscow that the current OPEC/Russia producer cut agreement could be extended until the end of 2018. Russia recently held discussions with oil ministers from Venezuela, Qatar and Iran as confidence improves among the cartel that the recent cuts are successfully rebalancing supply. OPEC last met in May, and isn’t scheduled to reconvene until November 2017 in Vienna, with the Saudi’s likely to hold the main cards with respect to any extension agreement.”