Oil prices rise as crude output declines

Oil prices rise as crude output declines

US oilfields contain the light, sweet crude that is ideal for gasoline, not the heavier sour oil from the Middle East that American refineries need for turning out diesel and other middle distillates.

Brent crude, the global benchmark, was up $1.25 to $57.20 a barrel at 1113 GMT.

The West Texas Intermediate (WTI) for February delivery gained 0.55 USA dollar to settle at 47.09 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery increased 1.04 dollars to close at 55.95 dollars a barrel on the London ICE Futures Exchange. That makes the U.S. the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

Traders pointed to signs that Saudi Arabia is beginning to make good on vows to cut output.

According to data from Bloomberg, Saudi exports in December fell by about half a million barrels per day to stand at 7.253 million bpd.

Vessels last month carried about 534,000 bpd from Saudi Arabia to the United States, down from 632,000 bpd in November. "Recent weakness in prices should slow the growth of US shale production".

In the USA, the American Petroleum Institute was said to report oil inventories at the storage hub in Cushing, Oklahoma, have risen by 483,000 barrels last week.

But oil gain's were checked through the day by US stock markets diving on news from late Wednesday that Apple (NASDAQ:AAPL) was lowering its revenue forecast blaming weakness in China.

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But the OPEC cuts may matter less if China, and by extension the world, is on the cusp of a recession, analysts say. "I think that's part of it", said Kilduff.

Brent for March settlement rose $1.75 to $55.55 a barrel on the London-based ICE Futures Europe exchange, and traded at an $8.22 premium to WTI for the same month.

Global slowdown fears were being pitted against the OPEC cuts, Phil Flynn of the Price Futures Group in Chicago observed in his Thursday note on oil, although he said the cartel "is prepared to do whatever it takes to stabilize prices, even if it means losing some market share to the shale oil producers".

Oil LCOc1 has slid to $56 a barrel from a four-year high of $86 in October on signs of excess supply.

A survey from the Institute for Supply Management on Thursday showed US factory activity slowed more than expected in December, and leading economies in Asia and Europe have reported a fall in manufacturing activity. "Now we're starting to see that".

The slowdown in China and turmoil in stock and currency markets is making investors nervous, including in oil markets.

"Some of it was a decline in OPEC production". While OPEC's output plunged by the most in nearly two years last month and producers have pledged to curb supplies through the first half of 2019, concerns about oversupply prevail as stockpiles at America's main storage hub show signs of swelling. The energy minister for the United Arab Emirates said on Tuesday he remained optimistic about achieving a market balance in the first quarter.

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