Sunday, 24 March, 2019


Oil Rises 3 percent; Lifted by OPEC Cuts

Oil Rises 3 percent; Lifted by OPEC Cuts Oil Rises 3 percent; Lifted by OPEC Cuts
Conrad Doyle | 09 January, 2019, 11:25

OPEC pumped some 32.68 million b/d down 460,000 b/d from November and the largest month-on-month drop since January 2017 when the first OPEC+ oil production deal was first put in place to drain down a then-oil supply glut that had seen prices plunge from $100 per barrel in mid 2014 to under $30 per barrel by January 2016.

"Very high Saudi and Russian production, in particular, has heightened supply volatility, so whether Opec and Russia maintain production discipline and renew agreements to limit output are key concerns going into the new year", said Steve Wood, Moody's managing director, oil and gas.

Brent crude LCOc1 futures rose $1.47 to $58.53 a barrel, a 2.6 percent gain, as of 11:12 a.m. EST (1612 GMT).

U.S. West Texas Intermediate (WTI) crude oil futures settled up $1.26, or 2.6 per cent, at $49.78 a barrel. Oil futures have gained more than 7 percent since last Monday. Last Thursday, all three major US stock indexes plunged by 2 percent after a dire revenue warning from Apple heightened fears of a global economic slowdown. "Momentum is coming back into the market from very depressed price levels", Petromatrix strategist Olivier Jakob said, according to Reuters.

But looming over the OPEC-led cuts is a surge in USA oil supply - now the world's top producer - driven by a steep rise in onshore shale drilling.

Further support for higher crude oil prices came from rising Turkish exports of Iranian crude, planned output cuts in Saudi Arabia and the nearly omnipresent problems in Libya's Sharara oil field.

American crude stockpiles probably declined by 1.75 million barrels last week, according to a median estimate in a Bloomberg survey of analysts ahead of United States government data today.

Consultancy JBC Energy said it was likely that USA crude oil production was already "significantly above 12 million bpd" by early January. United States crude inventories at Cushing, Oklahoma, the delivery point for USA crude futures, fell by 565,000 barrels from last Tuesday to Friday, traders said, citing data from market intelligence firm Genscape. "Maybe the pace of fluctuation was higher in the past weeks, but that is driven not only by market fundamentals; it's driven as well by geopolitics, trade wars, sanctions and many other things".

S&P Global Ratings said it had lowered its average oil price forecasts for 2019 by $10 per barrel to $55 and $50 per barrel for Brent and WTI, respectively. Societe Generale cut its 2019 oil price forecast for Brent by $9 to $64 a barrel and reduced its forecast for USA light crude by $9 to $57 a barrel.

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