Published: Tue, January 22, 2019
Money | By Bruce West

Oil rises as investors latch on to OPEC cuts, supply outlook

Oil rises as investors latch on to OPEC cuts, supply outlook

US output has soared by 2.4 million bpd since January 2018 and stockpiles of crude and refined products have risen sharply, according to the US Energy Information Administration. US crude futures fell $1.00 to $51.31 a barrel, off 1.9 percent.

On Tuesday, China's National Development and Reform Commission gave support to crude oil prices when they spoke about adding more fiscal stimulus.

According to the IEA, a sharp fall in Saudi Arabia's output from its record highs ahead of new OPEC/non-OPEC supply cuts along with further unplanned outages in Iran and Libya and a seasonal drop in biofuels wiped 950 kb/d off global oil production in December.

The West Texas Intermediate for February delivery declined 0.24 US dollar to settle at 52.07 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery decreased 0.14 dollar to close at 61.18 dollars a barrel on the London ICE Futures Exchange.

Global oil demand remains on course to be stronger this year than in 2018 as a boost from lower fuel prices counters slowing economic activity, according to the International Energy Agency.

In the United States, energy companies cut the number of rigs drilling for oil by 21 last week, the biggest decline in three years, taking the count down to 852, the lowest since May 2018, energy services firm Baker Hughes said on Friday.

Despite troubling economic data from China which weighed on oil prices in the beginning of the week, improving fundamentals are beginning to push crude prices upward.

Analysts said a more robust backdrop for financial markets and the prospect of slower crude production growth were the major drivers behind the rally in oil.

At 10:34 EST on Monday, WTI Crude was up 0.44 percent at $54.28, while Brent Crude was up 0.38 percent at $62.94.

The shift in sentiment culminated with the global benchmark closing at its highest in eight weeks on Friday after China was said to propose a ramp-up in imports from the U.S.to end a trade war between the world's two largest economies. Distillate fuel production decreased for the same period, averaging 5.4 million barrels per day.

Iran registered the third-largest decline in output, also involuntary, as US sanctions that started in November discouraged companies from buying its oil.

The news agency, which compiled data from the New York Mercantile Exchange, went on to remark that "U.S. crude prices have rebounded more than 18 percent to start this year: that's the biggest climb over the first 13 trading days since January 2001".

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