Crude Prices Boosted by Saudi Oil Minister's Comments
18 January 2017 - 5:52AM
Dow Jones News
By Timothy Puko
Oil prices rose Tuesday on the back of optimistic forecasts from
the Saudi oil minister and a steep fall in the dollar.
Saudi Oil Minister Khalid al-Falih told reporters in the United
Arab Emirates that the market would rebalance by the end of the
first half, according to media reports. The dollar also fell to a
one-month low, the type of move that makes dollar-traded oil less
expensive for foreign buyers and often causes prices to rise.
"All the above," Donald Morton, a trader at Herbert J. Sims
& Co., said about why oil was moving higher. "It doesn't have
an excuse to go lower."
Light, sweet crude for February delivery recently gained 54
cents, or 1%, to $52.91 a barrel on the New York Mercantile
Exchange. Brent, the global benchmark, gained 19 cents, or 0.3%, to
$56.05 a barrel on ICE Futures Europe.
Crude prices strengthened overnight after Saudi Arabia, the de
facto leader of the Organization of the Petroleum Exporting
Countries, touted the effect of its production cut pact with major
non-OPEC producers. Declining oil revenue for the government has
forced Saudi leaders to become very supportive of oil production
cuts, and public comments like those from Mr. al-Falih reemphasizes
their urgency, said Peter Cardillo, chief market economist at First
Standard Financial in New York.
"Producing nations want to avoid a slump in prices," he said.
"What they command, they can still achieve."
Oil also got a boost from the dollar, which President-elect
Donald Trump said in an interview with The Wall Street Journal was
already "too strong" in part because China holds down its currency.
The WSJ Dollar Index, which measures the U.S. currency against 16
others, was recently down 1.1%, trading at its lowest level in a
month.
Prices have been stuck at levels just above $50 since the start
of December, boosted there by the OPEC deal. Though they neared the
bottom of the range in the past week or so, they are unlikely to
break below it, in part because of OPEC but also from "aggressive
Chinese buying," analysts at Citigroup Inc. said Tuesday.
Refineries are running hard and heating demand is high because
of cold weather in Asia, Citi said. Recent government-backed
research forecast China's net crude imports would rise by 400,000
barrels a day this year, but new refinery capacity, growing
strategic government reserves and declining domestic production
could make that an underestimate, the bank said.
Gasoline futures recently gained 1% to $1.6272 a gallon and
diesel futures gained 0.9% to $1.6669 a gallon.
Chris Dieterich and Jenny W. Hsu contributed to this article
Write to Timothy Puko at tim.puko@wsj.com
(END) Dow Jones Newswires
January 17, 2017 13:37 ET (18:37 GMT)
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