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Oil gains on Saudi output cuts; rally limited by U.S. output

Reuters  |  NEW YORK 

By Jessica Resnick-Ault

NEW YORK (Reuters) - prices rose almost 2 percent on Wednesday after top exporter said it would cut crude exports and deliver an even deeper cut to its production, but swelling U.S. crude inventories limited the day's gains.

U.S. crude inventories rose last week to the highest since November 2017 as refiners cut runs to the lowest since October 2017, the Information Administration said.

The increase came despite falling net imports, which dropped to the lowest on record, as domestic crude production remained at peak levels for the fifth straight week.

Brent crude futures settled up $1.19, or 1.9 percent, at $63.61 a barrel. The global benchmark touched a session high of $63.98, but pulled back after the EIA data was released.

U.S. crude futures settled up 80 cents, or 1.5 percent, at $53.90 a barrel, after touching $54.60 earlier in the session.

"This report is bearish," said an analyst at in "The market is holding up because of the outside markets, the hope for a trade deal, and a strong Dow," he said.

Still the somewhat bearish report did little to shake the market's overwhelmingly bullish sentiment, said Tom Saal, at in

"It's a little bit on the bearish side," Saal said. "But the about is pretty significant, so the market is reacting to that more so than anything else right now."

On Tuesday, Saudi minister told the kingdom's production will fall below 10 million barrels per day in March, more than half a million below the target it agreed to in a deal between and its allies, aimed at curbing a global supply overhang.

The Organization of the Exporting Countries said on Tuesday it had cut output by almost 800,000 bpd in January to 30.81 million bpd. is responsible for most of that reduction.

"The feel-good factor is back in play but are by no means out of the woods yet," said.

"It is a well-known fact that the world economy is losing momentum amid a plethora of downside risks including lingering U.S.-trade tensions and geopolitical uncertainty."

U.S. restrictions on Venezuela's sector should remove some 330,000 bpd in supply this year, according to

The has risen by 20 percent so far this year, yet most of that increase came in early January, before the imposition of U.S. sanctions on Venezuela's

The global remains well supplied, said in its monthly market report on Wednesday, and output should still outstrip demand this year.

"Oil prices have not increased alarmingly because the market is still working off the surpluses built up in the second half of 2018," the IEA said.

"In quantity terms, in 2019, the U.S. alone will grow its by more than Venezuela's current output. In quality terms, it is more complicated. Quality matters."

U.S. crude output is expected to grow by 1.45 million bpd this year and by another 790,000 bpd next year to hit 13 million bpd in 2020, according to the EIA

The growth, led by U.S. shale oil output, has built up global inventories of crude and refined products. Refining margins for gasoline have collapsed.

(For a graphic on Russian, U.S. & Saudi crude oil production, click here https://tmsnrt.rs/2CTwqaq)

(Additional Reporting by Scott DiSavino in New York, Amanda Cooper in London and Henning Gloystein in Singapore; Editing by Marguerita Choy, and Tom Brown)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, February 14 2019. 03:25 IST
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