U.S. West Texas Intermediate crude oil finished 2017 higher in what can best be described as a volatile two-sided trade. After trending lower from January to June, the market stabilized enough to fuel an even stronger rally during the latter half of the year, ending on a high note after reaching its highest level since July 2015.
WTI crude oil is in a position to pick up where it left off in 2017 by finishing higher the first week of the new year higher on concerns that the escalation of unrest in Iran will eventually have an effect on supply and another decline in U.S. inventories as refining activity hit a 12-year high.
According to weekly government statistics, U.S. stocks fell more than expected, continuing a steady drawdown of supplies in the world’s largest oil consumer, though stocks of distillates and gasoline rose on heavy refining activity driven in part by year-end adjustments.
The U.S. Energy Information Administration reported that U.S. crude stocks fell by 7.4 million barrels in the last week of 2017, exceeding expectations, as refiners boosted activity to their highest rate since 2005.
Some traders are starting to question the validity of the rally since the unrest in Iran is expected to have no impact on the OPEC member’s ability to produce oil. Furthermore, the North Sea Forties and the Libyan pipelines are back to carrying oil. Additionally, U.S. production will likely break though 10 million barrels per day.