The Bull

Tuesday 26

March, 2019 7:37 PM



Oil lifted by OPEC cuts, steadying market

Oil lifted by OPEC cuts, steadying market

Support from OPEC production cuts and steadying equities markets has seen oil prices rebound further from 18-month lows reached in December.

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By AAP 08.01.2019 07:33 AM

Oil prices have edged higher, rebounding further from 18-month lows reached in December, on support from OPEC production cuts and steadying equities markets.

Brent crude futures rose 27 cents to settle at $US57.33 a barrel, a 0.47 per cent gain.

US West Texas Intermediate crude futures rose 56 cents to settle at $US48.52 a barrel, a 1.17 per cent gain.

Oil futures have gained more than 7 per cent since last Monday.

"Momentum is coming back into the market from very depressed price levels," Petromatrix strategist Olivier Jakob said.

Prices drew support from a Wall Street Journal report saying that Saudi Arabia is planning to cut crude exports to around 7.1 million barrels per day by the end of January.

OPEC and its allies are trying to rein in a surge in global supply, driven mostly by the United States, where production surpassed 11 million bpd in 2018.

Record high crude oil production has pushed up US inventories.

OPEC oil supply fell in December by 460,000 barrels per day to 32.68 million bpd, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia.

"We continue to view the OPEC production cuts that became official last week as a legitimate bullish consideration and we still look for the reduction to translate to a reduced US crude surplus that could potentially be erased in some eight to nine weeks," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

US crude inventories at Cushing, Oklahoma, the delivery point for US crude futures, fell by 565,000 barrels from last Tuesday to Friday, traders said, citing data from market intelligence firm Genscape.

More upbeat equity markets also offered support.

"When stock markets are strong oil usually follows suit," PVM Oil Associates strategist Tamas Varga said.

Shares have risen on expectations that trade talks this week between the United States and China will ease the trade war.

Disruptions to trade undermine prospects for economic growth and oil demand.

Goldman Sachs said in a note it had downgraded its average Brent crude oil forecast for 2019 to $US62.50 a barrel from $US70 due to "the strongest macro headwinds since 2015."

Societe Generale cut its 2019 oil price forecast for Brent by $US9 to $US64 a barrel and reduced its forecast for US light crude by $US9 to $US57 a barrel.

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