US crude sinks to lowest since July

Updated 28 December 2013
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US crude sinks to lowest since July

LONDON: US crude fell toward $96 a barrel to its lowest since July on Wednesday, outpacing a smaller drop in Brent futures, pressured by ample supplies and a further inventory build-up in the United States, the world's top consumer.
Maintenance at US refineries and pipeline outages have led to an increase in domestic stocks, stretching Brent's premium to the US benchmark also known as WTI to more than $13 a barrel, its widest since April.
US crude fell $1.83 to $96.47 and earlier reached $96.16, its lowest since July 1. Brent crude fell $1.23 to $108.74 a barrel by 1445 GMT, after hitting a session high of $110.06.
"The weakness in the Brent/WTI spread reflects refinery maintenance and growing crude stocks in the US," said Christopher Bellew, an oil broker at Jefferies Bache."
"Other bearish factors are the warm autumn in the northern hemisphere and Libyan oil coming back onto the market."
Adding to a series of reports of rising crude stocks, the US government's Energy Information Administration - returning to its normal schedule after the government shutdown - said inventories rose by 5.2 million barrels, more than forecast.
On Monday, the US government said they rose by 4 million barrels in the week to Oct. 11 and increased at the Cushing storage hub for the first time since the end of June.
The EIA report released at 1430 GMT showed a larger rise in crude stocks than the 2.9-million-barrel increase expected by analysts and the 3-million-barrel increased reported by industry group the American Petroleum Institute on Tuesday.
Brent could break below $109, Bellew said earlier in the day, and other analysts saw a weakening chart pattern for US crude. Its 200-day moving average at $98.62 is now a resistance level after prices fell below that mark.
"The technical picture in WTI is turning more negative as WTI broke the support of the 200-day moving average and it has its five-day moving average trending below the nine-day," said Olivier Jakob, consultant at Petromatrix.
Stockpiles also built in China, the second-largest oil consumer, in September, official news agency Xinhua said on Wednesday, as crude imports jumped to a record high.
Rising output of shale oil added to the picture of an amply supplied US market. The Eagle Ford formation in Texas has beaten North Dakota's Bakken to the milestone of 1 million barrels per day, the EIA said.
Uncertainty over the future of Scotland's Grangemouth refinery also supported Brent. The refinery provides steam to a plant which processes Forties, the largest crude oil stream underpinning Brent futures.


OPEC cut ‘biggest in almost 2 years’

Updated 45 min 6 sec ago
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OPEC cut ‘biggest in almost 2 years’

  • OPEC said in a monthly report its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd
  • OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018

LONDON: OPEC said on Thursday it had cut oil output sharply in December before a new accord to limit supply took effect, suggesting producers have made a strong start to averting a glut in 2019 as a slowing economy curbs demand.
The Organization of the Petroleum Exporting Countries said in a monthly report its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd, the biggest month-on-month drop in almost two years.
Worried by a drop in oil prices and rising supplies, OPEC and its allies, including Russia, agreed in December to return to production cuts in 2019. They pledged to lower output by 1.2 million bpd, of which OPEC’s share is 800,000 bpd.
The reduction in December means that should OPEC fully implement the new Jan. 1 cut, it will avoid a surplus that could weaken prices. Oil slid from $86 a barrel in October to below $50 in December on concerns of excess supply.
OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018 although it was more upbeat about the economic backdrop than last month and cited better sentiment in the oil market, where crude is back above $60.
“While the economic risk remains skewed to the downside, the likelihood of a moderation in monetary tightening is expected to slow the decelerating economic growth trend in 2019,” OPEC said.
“This has recently been reflected in global financial markets. The positive effect on market sentiment was also witnessed in the oil market,” it said.
The supply cut was a policy U-turn after the producer alliance known as OPEC+ agreed in June 2018 to boost supply amid pressure from US President Donald Trump to lower prices and cover an expected shortfall in Iranian exports.
OPEC changed course after the slide in prices starting in October. A previous OPEC+ supply curb starting in January 2017 — when OPEC production fell by 890,000 bpd according to OPEC figures — got rid of a glut formed in 2014-2016.
In a sign of excess supply, OPEC’s report said oil inventories in developed economies had stayed above the five-year average in November.
The biggest drop in OPEC supply last month came from Saudi Arabia and amounted to 468,000 bpd, the survey showed.
Saudi supply in November had hit a record above 11 million bpd.
The Kingdom told OPEC it lowered supply to 10.64 million bpd in December and has said it plans to go even further in January by delivering a larger cut than required under the OPEC+ deal.
The second-largest was an involuntary cut by Libya, where unrest led to the shutdown of the country’s biggest oilfield.
Output from Iran posted the third-largest decline, also involuntary, as US sanctions that started in November discouraged companies from buying its oil.
Iran, Libya and Venezuela are exempt from the 2019 supply cut deal and are expected by some analysts to post further falls, giving a tailwind to the voluntary effort by the others.
OPEC said in the report that 2019 demand for its crude would decline to 30.83 million bpd, a drop of 910,000 bpd from 2018, as rivals pump more and the slowing economy curbs demand.
Delivering the 800,000 bpd cut from December’s level should mean the group would be pumping slightly less than the expected demand for its crude this year and so avoid a surplus. Last month’s report had pointed to a surplus.
The figures for OPEC production and demand for its crude were lowered by about 600,000 bpd to reflect Qatar’s exit from the group, which now has 14 members.