Oil rebounds as OPEC output cuts seen deeper than expected

Both major oil futures contracts rallied sharply yesterday but are now at or close to their lowest levels for over 15 months. — Reuters pic

Both major oil futures contracts rallied sharply yesterday but are now at or close to their lowest levels for over 15 months. — Reuters pic

But supplies are growing again, and the China-US trade tensions and other factors have investors anxious that slowing economic growth could erase demand.

U.S. crude inventories at Cushing, Oklahoma, the delivery point for United States crude futures, rose by 1.85 million barrels in the week through Dec 18, traders said, citing data from market intelligence firm Genscape.

This was smaller than the decrease of 2.4 million barrels analysts had expected.

Heating oil futures gained about 2.7 percent to $1.8012 a gallon.

"The complex is piecing together a modest advance so far today but only one that offsets a miniscule portion of recent losses", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Brent earlier hit a session low of $54.64 a barrel, the weakest since mid-September 2017, while WTI sank to $45.82, near its lowest since late August 2017. The prospect of a possible government shutdown in the United States, the world's biggest oil consumer, added to investors' worries.

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And according to the rules, any planned leave by an essential employee is canceled and employees are expected to report to work. Those being furloughed include almost everyone at NASA and 52,000 workers at the Internal Revenue Service.

The Federal Reserve is expected to raise interest rates on Wednesday.

Oil prices extended this week's sell-off on Friday, posting the worst weekly performance in almost three years, as global oversupply kept buyers away from the market ahead of the long festive break. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.

Crude has collapsed nearly 40 percent from a four-year high in early October, and is set for the worst quarterly decline since December 2014.

While the recent oil price drop suggests many don't believe these cuts will be as effective as the first ones in 2017, Zuercher noted a report by the Wall Street Journal that Saudi Arabia plans to cut more than initially expected, and the fact that Venezuela's production would likely continue downwards as would Iran's under the weight of USA sanctions.

Barkindo said to reach the proposed cut of 1.2 million barrels per day, the effective reduction for member countries was 3.02 per cent. This is a certainly large cut but it is based on cutting from record-high production rates of over 11 million bpd.

Saudi Arabia's energy minister, Khalid al-Falih, said on Wednesday he expected global oil stocks to fall by the end of the first quarter. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy.

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