Oil Rises as OPEC Aims for Deeper Cuts

Posted by Joseph Keefe

OPEC says 90 percent of oil output cuts made in
January; OECD oil inventories likely to fall this
year.

Oil prices rose more than $1 a barrel on Tuesday after OPEC said
it was sticking to its agreement to cut production and hoped
compliance with the deal would be even higher.

OPEC Secretary General Mohammad Barkindo said January data showed
conformity from participating OPEC nations with output curbs had
been above 90 percent and oil inventories would decline further
this year.

"All countries involved remain resolute in the determination to
achieve a higher level of conformity," Barkindo said in a
conference speech in London.

Benchmark Brent crude oil jumped $1.13 a barrel to a high of
$57.31 before easing to trade around $57.15 by 1125 GMT.

U.S. light crude was up $1.00 at $54.40, having risen by about
0.5 percent in a shortened session on Monday because of a U.S.
national holiday.

The Organization of the Petroleum Exporting Countries and other
producers outside the group agreed in November to cut output by
about 1.8 million barrels per day (bpd) in an effort to drain a
glut that has depressed prices for over two years.

The cuts have spurred a speculative move into crude oil that has
pushed prices towards the top of their recent ranges.

Money managers now hold the highest volume of net long Brent
futures and options on record, InterContinental Exchange data
showed on Monday, betting on higher prices to come as OPEC and
other key exporters reduce production.

Net long U.S. crude futures and options positions are also at a
record high, U.S. data showed on Friday.

"This prolonged and increasing overcrowding of speculative net
longs should be a cause for concern," said Jonathan Chan, an
investment analyst at Phillip Futures.

"Should there come a time when these speculative positions decide
to unwind, oil prices will be in for a significant correction."

Despite signs that OPEC's agreement is holding, inventory levels
are still very high in many parts of the world.

U.S. crude oil and gasoline inventories soared to record highs
last week as refineries cut output and gasoline demand softened.

More evidence of the state of the U.S. oil market will come on
Thursday when the U.S. Department of Energy publishes stocks
figures. Those numbers could be a catalyst for a market move,
said Carsten Fritsch, analyst at Commerzbank in Frankfurt:

"Until then, lack of bearish news seems to be enough to push
prices higher," Fritsch said.

By Christopher Johnson

Feb 21, 2017

Let's block ads! (Why?)

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.