Economy

Oil prices rally amid OPEC-led output cut deal, falling U.S. inventories

Oil prices rally amid OPEC-led output cut deal, falling U.S. inventories”

International Brent crude futures gained 55 cents to $57.88 per barrel by 0945 GMT. "Stripping out Qatar, which exited OPEC at the end of the month, and Iran, Libya and Venezuela, which were granted exemption from the latest round of cuts, the remaining 11 members pumped 26.89 million b/d-almost 1 million b/d above their collective ceiling of 25.94 million b/d, which went into effect January 1", the survey showed. In fact, the continuous low price of oil is depicting a weaker economy of the world and the surging United States production.

Worldwide benchmark Brent crude was trading at $58.68 a barrel at around 12 p.m. London time (7 a.m ET), down around 1.4 percent, while West Texas Intermediate (WTI) stood at $50.52, more than 1.7 percent lower.

West Texas Intermediate for February delivery traded up 2.5 percent to $49.71 at 12:21 p.m. local time.

Futures in NY rose as much as 1.6 per cent on Monday following six days of gains, the longest streak of increases since July 2017.

"Momentum is coming back into the market from very depressed price levels", Petromatrix strategist Olivier Jakob said. The further trim of January's exports are expected to be felt mostly in the USA market.

Since the turn of the year investors holding oil have been helped by Opec's output cuts.

Saudi Arabia is reportedly planning further cuts to its crude oil exports in order to lift commodities prices and cover its recently announced 9% increase in government spending.

"The oil market continues to rally as the OPEC and non-OPEC production cuts are taking effect, reducing the oversupply situation that we've been seeing in the market", said Andrew Lipow, president of Lipow Oil Associates in Houston.

"Surely, there will be more twists and turns in the saga and increasing US tariffs on Chinese goods after March from 10 percent to 25 percent can not be excluded", Tamas Varga of PVM Oil Associates said.

But looming over the OPEC-led cuts is a surge in US oil supply, driven by a steep rise in onshore shale drilling.

Consultancy JBC Energy said it was likely that U.S. crude oil production was already "significantly above 12 million bpd" by early January. Shares have risen on expectations that trade talks this week between the United States and China will ease a trade dispute. Though it will enjoy a portion of support from the lower oil prices, the comprehensive economic growth across the world may slow down significantly, resulting in tumbling market conditions.

As a result, USA crude oil production rose by 2 million barrels per day (bpd) past year to a world record 11.7 million bpd.



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