Oil rally finally slips on the first Friday of 2018

The announcement of a major new oil discovery at a leading basin offshore Guyana, U.S. labor figures and profit-taking pushed oil prices lower on Friday.

With the snow subsiding in the eastern United States, a rally that pushed oil prices up 1 percent on the week runs out of gas on Friday. File photo by Brian Kersey/UPI | License Photo
With the snow subsiding in the eastern United States, a rally that pushed oil prices up 1 percent on the week runs out of gas on Friday. File photo by Brian Kersey/UPI | License Photo

Minutes before the opening bell in New York, Exxon Mobil and its partners at Hess Corp said they’ve declared a sixth “significant” oil discovery off the coast of Guyana. The five previous discoveries, including the giant Liza find, put offshore Guyana at more than 3.2 billion barrels of oil equivalent.

Hess Corp. CEO John Hess said in a statement the latest discovery “reaffirms the extraordinary exploration potential” of the area.

The announcement followed a report from Wood Mackenzie that said offshore basins like Guyana are among the more attractive ones for the bigger firms with pockets deep enough for exploitation. The Guyana development cost of $3.2 billion is considered relatively low for a field that could yield 450 million barrels of oil after first oil is on stream by 2020.

The discovery comes as traders are watching the gap between supply and demand shrink. The Organization of Petroleum Exporting Countries is in its second year of an effort to balance the market and, while U.S. shale was seen as a spoiler, exploration and production sloughed off last month, according to commodity pricing group S&P Global Platts.

The price for Brent crude oil was pulling back from heavy losses overnight, but still negative in the minutes before the start of trading in New York, down 0.73 percent to $67.57. The price for West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.95 percent to $61.42 at 9:25 a.m. EST.

The price for Brent crude oil is up more than 1 percent on the week and traders may be cashing in on the strong rally that opened the New Year. Part of the rally was supported by the surge in demand that greeted a major winter storm that pounded northeast U.S. states on Thursday. Arctic cold will grip the region through the weekend, though most of the energy infrastructure was spared by the weather.

On the economic front, the U.S. Labor Department said job prospects were relatively static. At 6.6 million, the department said Friday the number of people with a job last month “was essentially unchanged over the month.”

That came even after the surge in holiday shopping. New entrants into the labor pool declined by 116,000 last month.

By Daniel J. Graeber