Stockpiles Fall, Oil Prices Hold Gains

Stockpiles Fall, Oil Prices Hold Gains

Troy Powers
December 19, 2018

But amid mounting global uncertainty on everything from trade and monetary policy to politics, that forecast is far from consensus.

PRICE Futures Group's Phil Flynn on the outlook for oil prices.

Supply cuts that began in 2017 by OPEC and its allies had previously erased an inventory overhang that weighed on prices.

That should be enough to give the market a supply deficit by the second quarter of next year, if OPEC and the other large producers stick to their deal, the International Energy Agency said in its monthly Oil Market Report on Thursday.

"A large part of the move (lower) is due to a broader market sell-off, with both USA and Asian equity markets coming under pressure", said commodities strategist Warren Patterson at Dutch bank ING in Amsterdam.

North Sea Brent crude lost $2.41, or 4.0 percent, to a low of $57.20, a 14-month low, and last traded around $58.06, down $1.55. Brent crude is down almost 30 percent from its October highs of more than $86.

But the Organization of the Petroleum Exporting Countries and other big producers including Russian Federation said last week they agreed to cut production by 1.2 million barrels per day (bpd).

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OPEC cuts: sufficient or not?

Russia, a major oil producer but not a member of OPEC, will meet with the producer cartel on Friday to discuss production levels, and it is widely expected that a supply cut will be agreed. Considering the positive correlation between API and EIA reports, the market is likely to keep crude oil supported before the EIA report.

Oil prices steadied on Thursday, under pressure from high inventories but buoyed by a drawdown in USA crude stockpiles and indications that the trade war between the United States and China may be easing. That was the first weekly decline since October, analysts at the Sevens Report wrote in a newsletter Thursday, but they noted that given a change in the way the EIA reports production, in increments of 100,000 as opposed to exact estimates, "the decline could have been a rounding error". OPEC includes Algeria, Angola, Venezuela, Gabon, Iran, Iraq, Congo, Kuwait, Qatar, Libya, the United Arab Emirates, Nigeria, Saudi Arabia, Equatorial Guinea and Ecuador.

Still, oil demand growth is slowing, OPEC said.

Meanwhile, U.S. refinery runs have reached record-high levels. US light crude CLc1 was down 5 cents at $51.10.

"The energy complex is drifting lower as sellers continue to bask in the bearish afterglow of yesterday's (U.S.) stats", PVM Oil analyst Stephen Brennock said.

The Organization of the Petroleum Exporting Countries (OPEC) said demand for its crude in 2019 would fall to 31.44 million barrels per day (bpd), 100,000 bpd less than predicted last month and 1.53 million bpd less than it now produces.