Published: Tue, January 22, 2019
Money | By Ethel Goodwin

Oil rises as investors latch on to OPEC cuts, supply outlook

Oil rises as investors latch on to OPEC cuts, supply outlook

Oil prices fell on Thursday as U.S. crude production neared an unprecedented 12 million barrels per day (bpd) amid worries about weakening demand, particularly in light of the trade dispute between the United States and China.

The group said the impact of higher oil prices in 2018 was "fading", which should help to offset cooling economic growth over the coming months.

Optimism that the US and China could resolve some differences in the ongoing trade talks also pushed oil prices higher on Friday.

OPEC cut oil output sharply in December before a new accord to limit supply took effect, it said on Thursday, suggesting that producers have made a strong start to averting a glut in 2019 as a slowing economy curbs demand.

International Brent crude oil futures were at $62.57 per barrel at 0215 GMT, down 13 cents, or 0.2 percent, from their last close.

U.S. crude oil field production increased during the week ending January 11, the U.S. Energy Information Administration (EIA) said on Wednesday.

Oil headed for a third weekly increase on expectations that production cuts by OPEC and resilient fuel demand will keep global markets in balance.

In the USA, crude production climbed by 200,000 barrels a day last week to 11.9 million, the highest level in weekly figures compiled by the Energy Information Administration since 1983. Further profit booking activities also influenced some level of downward price action.

Anxious by a drop in oil prices and rising supplies, OPEC and allies including Russian Federation agreed in December to return to production cuts in 2019. At the same time, the shale-oil boom is continuing unabated in the USA, which by the middle of the year will be producing more crude than either Saudi Arabia or Russian Federation is able to.

The data, however, showed that the annualized fourth-quarter growth rate slowed to 6.4 percent, as expected.

"At 100.6 million (mb/d), supply was up 2.8 mb/d on a year ago".

Output cuts planned by the Organization of Petroleum Exporting Countries and its partners should stabilize world markets, though the process will be slow, the IEA said.

Refiners around the world also face a challenge this year as the industry adds 2.6 million barrels of daily processing capacity, the biggest increase in the records of the agency, which was set up in the 1970s.

In the United States, energy companies cut the number of rigs drilling for oil by 21 last week, the biggest decline in three years, taking the count down to 852, the lowest since May 2018, energy services firm Baker Hughes said on Friday.

With the rig count stalling, last year's growth rate is unlikely to be repeated in 2019, although most analysts expect annual production to average well over 12 million bpd, making the United States the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

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