Crude Oil Rallies Above $50 Before Pullback

Marcus Newton
September 15, 2017

OPEC and other major producers, including Russian Federation, agreed at the end of 2016 to reduce their combined oil output by nearly 1.8 million barrels per day (bpd) to help rebalance the market. This compared to expectations that inventories would rise by 3-million barrels. US refiners closed by Hurricane Harvey more than two weeks ago continue to restart, including the nation's largest, operated by Motiva Enterprises.

OPEC and a number of other producers including Russian Federation agreed a year ago on production cuts to ease a global supply glut, but prices haven't risen much above $50 per barrel as compliance has been a problem.

West Texas Intermediate, a measure of United States oil prices, hit $50 a barrel for the first time in 5 weeks on Thursday. USA light crude rose 77 cents to a high of $50.07 before easing to trade around $49.95, up 65 cents.

Hurricane Harvey, the storm that struck Texas more than two weeks ago, will remain a bigger concern for the oil market than Hurricane Irma which weakened Monday to a tropical storm, Goldman Sachs said.

USA crude production rebounded last week to an average of 9.4 million barrels per day from 8.8 million bpd a week earlier, entirely the result of increases in the lower 48 states.

Oil supply from outside of OPEC is expected to grow by 780,000 b/d in 2017, unchanged from last month's report, to 57.8 million b/d.

Oil prices climbed on Wednesday, as the International Energy Agency (IEA) reported a surplus of crude supply was starting to decline.

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The numbers show that "Hurricane Harvey's disruptive influence continues", said Smith, director of commodity research at ClipperData.

"On the one hand, the smaller-than-anticipated crude [supply] build, coupled with large draws to product stocks should provide support to crude prices, but continued weakness in refinery demand and rebounding production could serve to overshadow this signal", Troy Vincent, oil analyst at ClipperData, told MarketWatch.

"Outright benchmark crude prices gained in August, reflecting higher demand in the northern hemisphere and tight physical markets for oil products", the IEA said.

Elsewhere, gasoline futures fell 0.59% to $1.6347 a gallon and natural gas futures added 0.23%, to $3.064 per million British thermal units.

Crude oil prices posted slight gains early Tuesday after OPEC raised its expectations for demand growth, though a Kuwaiti bank warned against over-excitement.

It recommended that the USA strengthens its energy security to address events, such as hurricanes, by potentially adding products to government-held inventories. On September 11, 2017, U.S. crude oil futures again moved above the 20-day moving average.

"OECD demand growth continues to be stronger than expected, particularly in Europe and the US", the Paris-based IEA said.

Other reports by MaliBehiribAe

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