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

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

Researchers at Bernstein Energy said the supply cuts led by OPEC "will move the market back into supply deficit" for most of 2019 and that "this should allow oil prices to rise to USA $70 per barrel before year-end from current levels of US$60 per barrel".

Although EIA forecasts that oil prices will remain lower than during most of 2018, the forecast includes some increase in prices from December 2018 levels in early 2019 in order to keep up with demand growth and support the increased need for global oil inventories to maintain five-year average levels of demand cover. The price of oil remains about 20 percent up on the 18-month low registered in late December, but investors appear to remain concerned about the trade war between the United States and China.

In response to the drop in price in the second half of last year, the Organization of the Petroleum Exporting Countries and non-members such as Russian Federation and Oman will slash production by a joint 1.2 million bpd this year.

Brent crude oil futures surged previous year - despite abundant global stockpiles - on speculation that Saudi Arabia wanted an oil price of US$80 a barrel for its since-deferred stock exchange listing of state oil giant Aramco.

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

Hedge funds boosted their net wagers on rising Brent crude prices by 9 percent in the week ended January 15, mostly because they continued to unwind a short-selling spree from the end of 2018, data from the ICE Futures Europe exchange show.

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According to the IEA, a sharp fall in Saudi Arabia's output from its record highs ahead of new OPEC/non-OPEC supply cuts along with further unplanned outages in Iran and Libya and a seasonal drop in biofuels wiped 950 kb/d off global oil production in December.

The decline in Venezuelan production has also slowed, while more growth is expected in the United States where liquids production increased by an "incredible and unexpected" 2.1 million barrels a day in 2018, the IEA said.

Among the main drivers of oil prices in 2019 several of them will be bullish and some of them bearish, Francis Perrin, Senior Fellow at the OCP Policy Center (Rabat) and Senior Research Fellow at the French Institute for global and Strategic Affairs (IRIS, Paris) told Trend.

The data, however, showed that the annualized fourth-quarter growth rate slowed to 6.4 percent, as expected. In November, waivers were announced for eight major Iranian oil importers, among them China, India, Japan, South Korea, Turkey, Taiwan, Italy, and Greece. "The US, which is already the largest liquids producer, will become at the beginning of 2019 the largest crude oil producer before Russian Federation and Saudi Arabia thanks to its unconventional crudes".

EIA forecasts global oil demand to grow by 1.5 million b/d in 2019 and in 2020, with China as the leading contributor in both years.

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