Ashton Whiteley - OPEC Cuts Support Oil Amid Global Economic Uncertainty

Andrew Cummings
January 20, 2019

Analysts said oil prices had been weighted down by the expectations of weaker economic growth which would lead to weaker crude oil demand. "Even if this goal is too ambitious the U.S. will go on applying strong pressures on buyers of Iranian oil in order for them to stop importing crude from Tehran", said Perrin.

US output has soared by 2.4 million bpd since January 2018 and stockpiles of crude and refined products have risen sharply, according to the US Energy Information Administration. In both 2019 and 2020, China is the leading contributor to global oil demand growth. However, news hit the market during North American market hours that U.S. officials are considering reversing tariff's imposed on Chinese import goods in a bid to ease the impact of trade war on USA economy and help close a trade deal with China.

They were above that mark in November, figures in OPEC's report showed. API and EIA crude inventories continued to decline. Some of these importers (notably South Korea and Japan) reduced their Iranian oil imports to zero ahead of the sanctions' entry into effect.

Venezuelan President Nicolas Maduro was inaugurated for a second term on January 10. The Lima Group includes Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Guyana, Honduras, Panama, Paraguay, Peru and St. Lucia.

Neil Atkinson, head of oil industry and markets division at International Energy Agency, told Bloomberg television that "We think during the first quarter of 2019, supply and demand will be fairly closely matched" as long as the supply cuts promised by the Organization of the Petroleum Exporting Countries are implemented.

Saudi supply in November had hit a record above 11 million bpd after President Trump demanded more oil be pumped. However positive high impact news or market update is required to push the price higher resulting in consolidative price action in the market.

He pointed out that the USA sanctions already led to a strong fall in Iranian oil production and exports in 2018. Schlumberger Ltd. offered more reassuring news for those anxious about a glut of U.S. crude. The total number of active oil and gas drilling rigs is holding steady at 1,075, with the number of active oil rigs decreasing by 4 to reach 873 and the number of gas rigs increasing by 4 to reach 202.

The IEA said data show that Russian Federation increased crude oil production in December "to a new record near 11.5 mbd (million barrels per day) and it is unclear when it will cut and by how much".

That said, it's undeniable that crude's performance so far in 2019 is a far cry from the steep price plunges experienced in the closing months of 2018, a point not lost on Bloomberg, which on Friday noted that the commodity hasn't started off this strong since the turn of the century.

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