Crude oil price benchmarks diverge on competing narratives in early Monday trading. File photo by Monika Graff/UPI |
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Oct. 23 (UPI) -- Main benchmarks for the price of crude oil diverged early Monday following a drop in U.S. exploration activity and lingering geopolitical risk.
Drilling services company Baker Hughes reported a drop in rig activity in the United States last week, pulling wind out of the sails of a durable rally for the price of oil. Most of the downturn, however, may be attributed to a sector recovering from the string of hurricanes that swept through the U.S. south over the last few weeks.
Overall, the prospects for North America looked promising. On Monday, drilling services company Halliburton reported regional revenue was up 14 percent from the second quarter. President and CEO Jeff Miller said the company's portfolio in North America was "hitting on all cylinders."
Markets took that as a sign of a tighter regional market ahead. The price for West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.23 percent at 9:05 a.m. EDT to $51.96 per barrel. Brent, the global benchmark, was down 0.28 percent to $57.59 per barrel.
A smaller spread, or difference, between Brent and WTI diminishes the competitiveness for U.S. crude oil on the open market. The overall trend, meanwhile, matters for eventual production.
Economists with the Organization of Petroleum Exporting Countries said in their monthly market report for October that the price for WTI could be in a range between $50 per barrel and $55 per barrel for 2018. Any rise above that would encourage more drilling and lead to eventual gains in production, while a weaker market would suppress spending and possibly lead to the opposition situation.
Gains in U.S. shale oil production and a previous OPEC policy to defend a market position with more production pushed the price of oil below $30 per barrel last year. OPEC during the weekend said it was doing more than needed when it comes to efforts to balance the oversupplied market.
An emailed market report from London oil broker PVM said if OPEC doesn't extend its current deal to limit output, the market will continue to favor the supply side. If the deal is extended, and OPEC produces as much as it did last month, "oil inventories should decline somewhat in 2018."
A risk premium emerged last week when Iraqi forces pushed their Kurdish counterparts back to their own territory and took control over the oil fields in Kirkuk. The situation there is still fluid, though a return to normalcy, and the reconstruction of regional oil fields, could put hundreds of thousands of more barrels back on the market.
