UPDATE 6-Oil extends gains after surprise Saudi output cut and U.S. crude draw

  • Reuters
  • Commodities News
UPDATE 6-Oil extends gains after surprise Saudi output cut and U.S. crude draw
Credit: © Reuters.

* Saudi move 'reflects signs of weakening demand' -Goldman Sachs

* OPEC output rises in December - Reuters survey

* U.S. crude inventories fell 8 million barrels in week - EIA (New throughout, updates prices, market activity and comments, adds EIA data; new byline, changes dateline, previous LONDON)

By Jessica Resnick-Ault

NEW YORK, Jan 6 (Reuters) - Oil prices extended gains on Wednesday, rising to their highest since late February, after Saudi Arabia announced a big voluntary production cut, and as U.S. crude inventories declined in the latest week.

Brent crude LCO1c was up 88 cents, or 1.7%, to $54.48 a barrel at 11:24 a.m. EST (1524 GMT). Earlier in the session, it hit a high of $54.63 a barrel, a level not seen since Feb. 26, 2020.

U.S. West Texas Intermediate (WTI) futures CLc1 were up 75 cents, or 1.5%, to $50.68 a barrel. The contract touched $50.71 a barrel, its highest since Feb. 25.

Both contracts were up about 5% on Tuesday.

U.S. crude stocks fell sharply while fuel inventories rose, the Energy Information Administration said on Wednesday, and 2020 came to a close with a sharp decline in overall demand due to the coronavirus pandemic. EIA/S

Crude inventories USOILC=ECI fell by 8 million barrels in the week to Jan. 1 to 485.5 million barrels, exceeding analysts' expectations in a Reuters poll for a 2.1 million-barrel drop. The drop in crude stocks is typical for the end of the year, when energy companies take barrels out of storage to avoid hefty tax bills.

"We had a very substantial crude oil inventory draw helped by a second week of very robust crude oil exports as well as an increase in refinery utilization now exceeding 80%," said Andrew Lipow, president of Lipow Oil Associates in Houston.

High refinery consumption may be short-lived, said Bob Yawger director of energy futures at Mizuho in New York.

"We've burned through a lot of crude oil to make a lot of product, and there's no demand for the product," he said. "You can't run at that high a rate forever, with the numbers what they are."

Saudi Arabia, the world's biggest oil exporter, said on Tuesday it would make additional, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting of OPEC+, which groups the Organization of the Petroleum Exporting Countries and other producers, including Russia. coronavirus infections spreading rapidly, producers are wary of a further hit to demand.

OPEC+ agreed most producers would hold output steady in February and March while allowing Russia and Kazakhstan to raise output by a modest 75,000 bpd in February and a further 75,000 bpd in March.

"Despite this bullish supply agreement, we believe Saudi's decision likely reflects signs of weakening demand as lockdowns return," Goldman Sachs (NYSE: GS ) analysts wrote in a note, though they maintained an end-2021 forecast for Brent of $65 a barrel. oil output rose for a sixth month in December to 25.59 million bpd, a Reuters survey found, buoyed by further recovery in Libyan production and smaller rises elsewhere.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100
  • Amir Khan @Amir Khan
    good
    Like 0
  • tejshree thakur @tejshree thakur
    adding -I think OPEC will cut production 1bl/day ,, it is too much little.actully same time non OPEC increased 44bl/d , and other OPEC+ also increased last months 12bl/d, so it is not justified by oil community.reminds-I think already said that production will not cut and slightly increased inventory next 2-3 months. and maybe demand will be increase after 3-4 months till time market range will 28-49$ range. so sell at higher price we saw every time.
    Like 1
    • tejshree thakur @tejshree thakur
      mbpd
      Like 0
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100

Related Articles