Oil Makes Fresh Gains Amid Receding Oversupply Fears
11 January 2019 - 9:55PM
Dow Jones News
By Christopher Alessi
-- Oil prices climbed Friday after nine consecutive sessions of
gains, amid receding concerns over global oversupply and
macroeconomic risks to global growth.
-- Brent crude -- the global oil benchmark -- was trading up
0.9%, at $62.22 a barrel, on London's Intercontinental
Exchange.
-- West Texas Intermediate futures, the U.S. oil standard, were
up 1%, at $53.12 a barrel, on the New York Mercantile Exchange.
HIGHLIGHTS
Oil Rally: Crude prices have closed higher for nine straight
sessions in their longest winning streak in nine years. Both
benchmarks have risen roughly 25% from yearly lows hit at the end
of 2018, climbing back into bull-market territory. Prices had
plummeted in the fourth quarter of last year, dropping around 40%
from four-year highs reached at the start of October.
"Sentiment is normalizing" following the "extreme bearish levels
in December," said Giovanni Staunovo, commodities analyst at UBS
Wealth Management.
At the same time, Mr. Staunovo said, "economic growth concerns
are less pronounced," which is positive for oil demand.
Equities: Oil is also being supported by rising global stock
markets, which have been buoyed by signs of a potential thaw in
U.S.-China trade tensions and a more cautious approach to raising
interest rates from the U.S. Federal Reserve.
"This more than week-long rally was given fresh impetus as
shares on Wall Street eked out further gains amid lingering U.S.
China trade optimism," said Stephen Brennock, analyst at brokerage
PVM Oil Associates.
The Stoxx Europe 600 edged up 0.3% in morning trade in Europe,
putting it on course to end the week 1.9% higher.
Analysts at Commerzbank noted that "tailwind is coming from the
financial markets thanks to a weaker U.S. dollar and rising stock
markets." Dollar-denominated commodities like oil tend to have an
inverse relationship with the greenback, which was trading down
0.2% against a basket of 16 of its peers Friday morning, according
to the WSJ Dollar Index.
INSIGHT
OPEC+: Production curbs from the Organization of the Petroleum
Exporting Countries and its allies outside the oil cartel went into
effect at the start of the month, helping to alleviate investor
fears over a burgeoning global supply glut. OPEC and 10 partner
producers, led by Russia, agreed in early December to cut crude
output by a collective 1.2 million barrels a day for the first six
months of 2019. Saudi Arabia -- the de-facto head of OPEC and the
world's largest exporter of crude -- also vowed this past week to
further reduce its exports to keep the market in balance.
At the same time, rapid U.S. shale oil growth should slow over
the course of the year as a result of relatively lower prices,
according to analysts at Bank of America Merill Lynch. "On a net
basis, we see aggregate year-on-year global oil growth of just
400,000 barrels a day in 2019 and a deficit building into the
summer months," the analysts wrote in a note.
AHEAD
-- Baker Hughes on Friday reports weekly data on the number of
rigs drilling for oil in the U.S., a key metric of activity in the
sector.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
January 11, 2019 05:40 ET (10:40 GMT)
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