Friday, 13 January 2017

Oil rises as customers brace for output cuts

Oil prices rose for the first time in three days yesterday, following news of Saudi supply cuts to Asia, but persistent doubt over output reductions and signs of rising shipments from other producers kept gains in check.

Brent crude futures were up 41 cents at $54.05 a barrel while U.S. West Texas Intermediate crude futures were up 39 cents at $51.21 a barrel.

Brent has surrendered nearly 40 per cent of the gains made between late November and early January. Analysts, however, said the slide was unlikely to become more aggressive, given the likelihood of Saudi Arabia and its Gulf neighbors at least sticking to their pledge to cut output.

“Few envision that Brent crude at sub-$50 a barrel is a viable price (in the first half of 2017) amid Organisation of Petroleum Exporting Countries (OPEC) production cuts tightening up the market,” SEB commodities strategist Bjarne Schieldrop said.

Whether “last night’s low of $53.58/barrel turns out to be the low point remains to be seen. However, we do think that buying in the territory between the current price of $53.88/b and down to $50/b is probably as good as it gets for buyers in H1.”

Saudi Arabia, the world’s top oil exporter, has told some of its Asian customers that it will reduce their crude supplies slightly in February.

But there is still plenty of oil to fill the gaps left by the OPEC. North American drilling is on the rise, while European and Chinese traders are shipping a record 22 million barrels of crude from the North Sea and Azerbaijan to Asia this month.

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