Oil surges after OPEC indicates it will maintain output cuts

OPEC, Russia and other non-member producers agreed to reduce output by 1.2 million barrels per day from January 1 for six months. (AFP)
Updated 20 May 2019

Oil surges after OPEC indicates it will maintain output cuts

  • There is consensus among OPEC and allied oil producers to drive down crude inventories ‘gently’
  • Another bullish signal was a second week of declines in US drilling operations

TOKYO: Oil rose to multi-week highs on Monday after OPEC indicated it will likely maintain production cuts that have helped support prices this year, while tensions continued to escalate in the Middle East.
Brent crude was up by 96 cents, or 1.3 percent, at $73.17 a barrel by 0227 GMT, having earlier touched $73.40, the highest since April 26.
US West Texas Intermediate crude was 82 cents, 1.3 percent, higher at $63.58 a barrel. The US benchmark reached $63.81 earlier, the highest since May 1.
Saudi Energy Minister Khalid Al-Falih said on Sunday there was consensus among the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers to drive down crude inventories “gently” but he would remain responsive to the needs of a “fragile market.”
United Arab Emirates (UAE) Energy Minister Suhail Al-Mazrouei earlier told reporters that producers were capable of filling any market gap and that relaxing supply cuts was not “the right decision.”
Meanwhile, US President Donald Trump threatened Tehran on Sunday, tweeting that a conflict would be the “official end” of Iran, while Saudi Arabia said it was ready to respond with “all strength” and that it was up to Iran to avoid war.
The rhetoric follows last week’s attacks on Saudi oil assets and the firing of a rocket on Sunday into Baghdad’s heavily fortified “Green Zone” that exploded near the US embassy.
“Al-Falih and the UAE both put paid to suggestions of increasing production over the weekend and then President Trump essentially telling Iran to bring it on, was a perfect short-term storm for oil prices,” Greg McKenna, strategist at McKenna Macro, told Reuters by email.
OPEC, Russia and other non-member producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months to prevent inventories from increasing and weakening prices.
“This second half, our preference is to maintain production management to keep inventories on their way declining gradually, softly but certainly declining toward normal levels,” Al-Falih told a news conference after OPEC and other producers met.
Russian Energy Minister Alexander Novak earlier said an easing of cuts had been discussed and the supply situation would be clearer in a month, including from countries under sanctions.
Another bullish signal was a second week of declines in US drilling operations, with energy companies cutting oil rigs to the lowest since March 2018.
The rig count, an early indicator of future output, fell by 3 to 802, General Electric Co’s Baker Hughes energy services unit said on Friday.


Malaysia to study impact of India’s planned trade action

A truck carrying oil palm fruits passes through Felda Sahabat plantation in Lahad Datu in Malaysia's state of Sabah on Borneo island, February 20, 2013. (REUTERS)
Updated 45 min 19 sec ago

Malaysia to study impact of India’s planned trade action

  • Malaysia’s key imports from India include petroleum products, live animals and meats, metals, chemicals and chemical products

KUALA LUMPUR: Malaysia’s Prime Minister Mahathir Mohamad said his government will monitor the trade situation with India, which is reported to be considering trade curbs on the Southeast Asian nation over his criticism of actions in Kashmir, news wire Bernama reported.
Government and industry sources told Reuters last week that New Delhi is looking for ways to limit palm oil imports and other goods from Malaysia, in retaliation for Mahathir’s speech at the United Nations in September when he said India had “invaded and occupied” Jammu and Kashmir. Malaysia had said it did not receive “anything official” from India.
Mahathir said on Sunday his government will “study the impact of the action taken by India,” the government-owned Bernama said.
“They are exporting goods to Malaysia too. It’s not just one-way trade, it’s two-way trade,” Mahathir was quoted as saying in the report.
India is the world’s biggest importer of edible oils, and is the biggest buyer of Malaysian palm oil. It bought 3.9 million tons of Malaysian palm oil in the first nine months of 2019, according to data compiled by the Malaysian Palm Oil Board.
Malaysia’s key imports from India include petroleum products, live animals and meats, metals, chemicals and chemical products.