Sat,
Jun 23, 2018 - 6:40 AM
The Organization of the
Petroleum Exporting Countries and other top crude producers, meeting in Vienna,
agreed to raise output from July by about 1 million barrels per day (bpd).
The real increase,
however, will be around 770,000 bpd, according to Iraq, because several
countries that recently suffered production declines will struggle to reach
full quotas, while other producers may not be able to fill the gap.
The actual output
increases set a bullish tone, as they came in below some of the highest figures
that had been discussed prior to the meeting.
"We were teased
with an increase of about 1.8 million barrels (per day) at one point, and we
ended up getting about 600,000," Mr Kilduff said.
Brent crude settled up
US$2.50, or 3.4 per cent, to US$75.55 a barrel.
US crude rose US$3.04,
or 4.6 per cent, to US$68.58 a barrel, getting an additional boost after a
surprise large drawdown at the storage hub at Cushing, Oklahoma.
Brent crude was up 2.7
per cent on the week, while US crude was up 5.5 per cent.
In post-settlement
trading, both US and Brent crude continued to strengthen. Brent rose US$2.56 or
3.5 per cent to US$75.61, and US crude traded US$3.70, or 5.65 per cent to
US$69.23 a barrel by 4.07pm EDT.
US crude's discount to
Brent narrowed by about 15 per cent to US$6.36 in the session, making it the
smallest since May 11.
For about three weeks
ahead of the Opec meeting, prices had retreated from 3-1/2-year highs on fears
that larger production increases could lead to oversupply.
Ultimately, Saudi
Arabia persuaded Iran to cooperate with the plan to cut output, following calls
from major consumers to curb rising fuel costs.
Opec's decision
confused some in the market as the producers gave opaque targets for the
increase, making it difficult to understand precisely how much more it will
pump. The expectation that the increase will fall short of the 1 million bpd
figure boosted the market.
"The effective
increase in output can easily be absorbed by the market," Harry
Tchilinguirian, head of oil strategy at French bank BNP Paribas, told the
Reuters Global Oil Forum.
"You think about 1
million bpd coming back online... it's not going to happen instantaneously,
it's going to take time," said Brian LeRose, the senior technical analyst
at ICAP.
International marker,
Brent, traded above US$100 a barrel for several years until 2014, dropping to
almost US$26 in 2016 and then recovering to over US$80 last month.
The most recent price
rally followed an Opec decision to restrict supply in an effort to drain global
inventories.
The group started
withholding supply in 2017 and this year, amid strong demand, the market
tightened significantly, triggering calls by consumers for higher supply.
Falling production in
Venezuela and Libya, as well as the risk of lower output from Iran as a result
of US sanctions, have all increased market worries of a supply shortage.
Front-month US crude
futures extended their rally during the session, trading as much as US$1.51 a
barrel above the second month contract.
That was the biggest
premium since August 2014. The spread eased slightly to settle at about US$1 a
barrel.
A large decline in
inventories at the storage hub of Cushing, Oklahoma helped trigger the rally,
traders said.
Storage has fallen as
Gulf Coast refiners have soaked up crude that was available at a discount, said
Bob Yawger, director of Energy at Mizuho. The result is lower inventories at
the hub for at least seven weeks, he said.
US drillers cut the
number of rigs drilling for oil by one to 862, the first cut in 12 weeks,
according to a weekly report from GE's Baker Hughes division. The rig count is
a leading indicator of production.
Hedge funds and other
money managers cut their bullish wagers on US crude futures and options to the
lowest in nearly eight months as crude fell 1.4 per cent as US production
soared.
No comments:
Post a Comment