Oil Prices Add to Gains Amid OPEC Supply Moves
25 July 2017 - 1:27PM
Dow Jones News
By Jenny W. Hsu
Oil futures added to overnight gains in Asian trading Tuesday as
fresh pledges from Saudi Arabia and Nigeria to respectively pull
back on exports and output raised hopes that market rebalancing is
on the way.
At an Organization of the Petroleum Exporting Countries meeting
on Monday, Saudi Arabia announced it would cut August exports to
6.6 million barrels a day, which would be a million less than a
year earlier. The kingdom, the world's biggest crude exports,
typically rolls back shipments in the summer as domestic demand
peaks. But a shipment cut of that size would notably expedite
market rebalancing, some analysts contend.
Meanwhile, Nigeria--which has been exempt from this year's
OPEC-led production-cut deal--pledged to not top daily production
of 1.8 million barrels. The cartel's latest data put the country's
output at 1.64 million.
"These two factors are very-good signs for the oil markets
because at least we know exactly what the upside risks are," said
Barnabas Gan, an economist at OCBC.
He added that if Libya, another OPEC nation currently not in the
cutback deal, caps its output at 1.25 million barrels a day (some
25% above current production), the scope of Saudi Arabia's export
cut will still be sufficient to offset potential production
increases from Libya and Nigeria.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in September recently traded up 0.6% at $46.64 a
barrel in the Globex electronic session. September Brent crude on
London's ICE Futures exchange rose 0.6% to $48.91.
Oil prices have been in a funk for three years amid a persistent
supply glut of supplies. To chisel down the global inventories,
OPEC and a host of non-cartel heavyweights such as Russia agreed to
cut their collective production by 1.8 million barrels a day.
Market impact has been little thus far amid output growth from the
U.S. this year. But some say the effort is a sound solution to
bring supply and demand closer to equilibrium, or perhaps push the
market into a slight deficit.
Chinese demand, meanwhile, continues to provide support. The
country's implied oil demand rose 6% from a year earlier in June,
amid aggressive stockpile-building, said Energy Aspects.
Also, there's signs this year's shale upswing may be ebbing.
New-drilling growth has slowed this month, Baker Hughes data show,
while oilfield-services heavyweight Halliburton Co. said Monday
that activity is showing signs of plateauing. That as government
data on Wednesday are poised to show another drop in oil supplies,
says S&P.
Refined-products prices also rose in Tuesday's Asia trading.
Nymex September reformulated gasoline blendstock gained 0.4% to
$1.5390 a gallon, diesel rose 0.4% to $1.5284 and August ICE gasoil
added 0.1% to $451.75 a metric ton.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
July 24, 2017 23:12 ET (03:12 GMT)
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