NEW YORK, Jan 5 (Reuters) - Oil prices fell on Friday, dropping from highs last seen in 2015, as soaring USA production undermined a 10 percent rally from December lows that was driven by tightening supply and political tensions in OPEC member Iran.
Beyond a brief intraday spike in May 2015, these were the highest price levels since December 2014, during the oil price downturn.
"While the current momentum suggests that further upside is on the cards, it must be kept in mind that US shale remains a threat to higher oil prices". Graham-Wood suggests such a quota breach could see the oil price drop to $40 a barrel, but he feels that, as long as the Saudi-Russian relationship sticks, OPEC will see the revenue benefits of adhering to the output targets.
In a meeting with oil companies last Wednesday, the DOE reportedly struggled in determining which inventories it shall really be policing.
Oil rose today to its highest since May 2015, on concern about supply risks due to unrest in Iran and another decline in U.S. inventories, and refining activity hit a 12-year high.
Brent crude futures for March delivery fell 41 cents to $67.66 a barrel, a 0.6 percent loss.More news: James Damore sues Google for discrimination against conservative white men
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OPEC as well as non-OPEC members including Russian Federation, initiated an agreement to cut supplies in 2016, with the goal of lifting prices by diminishing the two-year excess of supply.
"Strong oil and gas production equals a strong New Mexico, providing more critical funding for our schools and state budget, and creating more jobs to grow our economy", said Ryan Flynn, executive director of the New Mexico Oil and Gas Association.
"Beyond the recent focus on street protests, the potential reinstatement of U.S. sanctions targeting the Iranian oil industry remains an issue", JBC analysts said.
The great hope of traders betting against the rally is that United States shale and other non-Opec supplies will grow faster than consumption this year.
The authority said, however, that gasoline inventories had gone up, by 4.8 million barrels last week, with average daily production at 9.7 million barrels. Strong demand growth, especially from China, has also been supporting crude.
US crude stockpiles have also dropped by around one fifth since their peak in March and ended 2017 at their lowest level since October 2015. Oil declined after Saudi Arabia told OPEC it raised production back above 10 million barrels a day in February, reversing about a third of the cuts it made the previous month. Supported by the global inventory drawdown and geopolitical woes, however, oil prices rose steadily in the fourth quarter of 2017 to end the year at above $60 per barrel WTI and $66 per barrel Brent. Another concern is Venezuela, where dire economic conditions have taken a toll on oil production.