Oil prices rise as Saudi Arabia tells Asian customers of output cuts
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London/ Singapore: Oil prices rose for the first time in three days on Wednesday, following news of Saudi supply cuts to Asia, but persistent doubt over output reductions and signs of rising shipments from other producers kept gains in check.
Brent crude futures were up 41 cents at $54.05 a barrel by 5.03pm, while US West Texas Intermediate crude futures were up 39 cents at $51.21 a barrel.
Brent has surrendered nearly 40% of the gains made between late November and early January. Analysts, however, said the slide was unlikely to become more aggressive, given the likelihood of Saudi Arabia and its Gulf neighbours at least sticking to their pledge to cut output.
“Few envision that Brent crude at sub-$50 a barrel is a viable price (in the first half of 2017) amid Organization of the Petroleum Exporting Countries (Opec) production cuts tightening up the market,” SEB commodities strategist Bjarne Schieldrop said.
Whether “last night’s low of $53.58/barrel turns out to be the low point remains to be seen. However, we do think that buying in the territory between the current price of $53.88/b and down to $50/b is probably as good as it gets for buyers in H1.”
Saudi Arabia, the world’s top oil exporter, has told some of its Asian customers that it will reduce their crude supplies slightly in February.
But there is still plenty of oil to fill the gaps left by the Opec. North American drilling is on the rise, while European and Chinese traders are shipping a record 22 million barrels of crude from the North Sea and Azerbaijan to Asia this month.
There is still doubt among many market watchers over whether the planned cuts will be enough to rebalance a market that has been oversupplied for the past two years.
“Traders continued to fret about rising US supply and compliance by Opec to agreed-upon production cuts,” ANZ bank said.
The US Energy Information Administration (EIA) said on Tuesday that crude production in the United States this year would rise by 110,000 barrels per day to 9 million bpd.
Another concern is high US crude stockpiles, with the EIA scheduled to release its latest figures on Wednesday.
Opec’s second-biggest producer Iraq plans to raise crude exports from its southern port of Basra to an all-time high of 3.641 million bpd in February, keeping shipments high even as Opec production cuts take effect this month. Reuters