Oil prices down despite Saudi export cuts

Oil prices down despite Saudi export cuts

Oil prices rose by 2 percent on Monday, extending a rally from 18-month lows hit in December with support from OPEC production cuts and steadying equity markets.

Oil has gained almost 12 per cent since last Monday, its biggest week-on-week rally since early December 2016.

Once again, the Organization of the Petroleum Exporting Countries' (OPEC) newly-implemented output cuts were credited for crude prices rising yet again on Monday: Brent rose 27 cents to settle at $57.33 per barrel, while West Texas Intermediate rose 56 cents to settle at $48.52 per barrel.

Crude oil prices were slightly down at the start of trading on Tuesday, despite reports that Saudi Arabia cut its crude exports to help boost prices.

OPEC oil supply fell in December 2018 by 460,000 barrels per day (bpd) to 32.68 million bpd, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia.

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.

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As a result, USA crude oil production rose by 2 million barrels per day (bpd) past year to a world record 11.7 million bpd. Meanwhile, expectations for a nationwide decline in United States crude inventories alleviated worries about a supply glut.

Consultancy JBC Energy said it was likely that USA crude oil production was already "significantly above 12 million bpd" by early January. U.S. crude inventories at Cushing, Oklahoma, the delivery point for USA crude futures, fell by 565,000 barrels from last Tuesday to Friday, traders said, citing data from market intelligence firm Genscape.

PRICE Futures Group senior analyst Phil Flynn on the outlook for oil prices and the impact on the US soybean market from the tariff tensions with China. "When stock markets are strong oil usually follows suit", PVM Oil Associates strategist Tamas Varga said.

Goldman Sachs downgraded its 2019 crude oil price view, but forecast a recovery from present levels in the absence of a "large" global economic slowdown and improving fundamentals along with signs of major producers trimming their production.

US Commerce Secretary Wilbur Ross said late on Monday that Beijing and Washington could reach a trade deal that "we can live with" as dozens of officials from the world's two largest economies held talks in a bid to end their trade dispute that has roiled global markets since a year ago.

"Spot prices will continue to recover with Brent backwardation set to return by summer as inventories eventually revert to 5-year average levels".

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