Oil prices climb - despite Trump’s ‘humble brag’ about making them low

Daniel Fowler
December 15, 2018

The American Petroleum Institute (API) on Tuesday reported a huge draw of 10.18 million barrels in the US crude oil inventories for the week ending December 7. Prices now hover around $60 a barrel, down from more than $85 a barrel in early October in the face of fears of weaker demand and an increase in supplies.

Concerned by mounting oversupply, the Organization of the Petroleum Exporting Countries and other oil producers including Russian Federation agreed last week to reduce output by 1.2 million barrels per day (bpd), or more than 1 percent of global demand. The price action also suggests that investors may be taking some time to digest the impact of the OPEC-led decision to trim production by 1.2 million barrels per day starting January 1.

Oil ministers said the cuts would be from October production levels except for Kuwait and that Iran, Venezuela and Libya - at risk of output declines due to USA sanctions, economic collapse and unrest, respectively - were not required to reduce supply.

Against this backdrop, West Texas Intermediate crude for January deliveryCLF9, +1.62% rose 25 cents, or 0.5%, to $51.40 a barrel on the New York Mercantile Exchange.

North Sea Brent crude oil fell below $60 a barrel on Thursday, under pressure from high global inventories and a smaller-than-expected drawdown in USA crude stockpiles.

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A force majeure on exports from Libya's El Sharara oilfield will result in a production loss of 315,000 barrels per day (bpd), and an additional loss of 73,000 bpd at the El Feel oilfield, according to the National Oil Company.

The agency's report stands in contrast to OPEC's own monthly oil market report, which was released Wednesday and showed a slight decline in the cartel's November output despite ballooning Saudi production.

In addition to the renewed optimism over the supply cuts, also supporting prices are the unexpected supply disruptions to Libyan oil exports. One energy expert said the production cuts would likely be "insufficient to mop up the inventories in the targeted three-month period till the end of the first quarter of 2019". A trade deal could lead to 1.56 million bpd in growth.

Early Tuesday, the EIA said the U.S.is set to end 2018 as the world's top oil producer.

January natural gas NGF19, +0.46% climbed by 1.5% to $4.198 per million British thermal units, looking to recoup some of its losses from Wednesday, when it dropped 6.2% to settle at $4.136-the lowest since November 15, according to FactSet data.

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