Oil Bounces Back as OPEC Sees Potential for Outside Supply Cuts - BLOOMBERG
BY Jacquelyn Melinek
(Bloomberg) -- Oil advanced for the first time in three days after a report that OPEC sees a potential reduction in supply from outside of the group.
Futures rose as much as 1.3% in New York Wednesday after the American Petroleum Institute reported that U.S. stockpiles fell 541,000 barrels last week, according to people familiar. Apart from a “sharp” cut in projected output from non-member countries next year, the Organization of Petroleum Exporting Countries also sees a possible “upswing” in the forecast for demand growth, according to Secretary-General Mohammad Barkindo. The comments underscore a more upbeat outlook for the oil market into the new year.
When the OPEC news hit the market, prices “started to rally from the red to the green,” said Bob Yawger, future divisions director for Mizuho Securities in New York. “Until this turnaround, things were getting ugly.”
While crude prices have picked up over the past month, they’re still down about 14% from the peak reached in April as the prolonged U.S.-China trade dispute saps an already-fragile global economy and crimps fuel demand. OPEC, which cut production this year to prop up the market, has signaled it’s unlikely to take stronger action to prevent a renewed glut in 2020.
Meanwhile, Federal Reserve Chairman Jerome Powell said the current stance of monetary policy is likely to be sufficient provided the economy stays on track, but warned that “noteworthy risks” remain to record U.S. expansion.
“The market is digesting chairman Powell’s speech,” said John Kilduff, partner at Again Capital in New York. “This is a bit of positive pull up from Powell. It’s the fact that the Fed is going to be on hold because the economic outlook is looking brighter and is a key aspect to the energy market these days because of the focus on the demand.”
West Texas Intermediate for December delivery traded at $57.45 at 4:37 p.m. after rising 32 cents to settle at $57.12 a barrel on the New York Mercantile Exchange.
Brent for January rose 31 cents to close at $62.37 a barrel on the London-based ICE Futures Europe Exchange, and traded at a $5.17 premium to WTI for the same month.
Read: Global Oil Demand to Hit a Plateau Around 2030, IEA Predicts
The industry-funded API also reported that stockpiles in Cushing, Oklahoma, fell 1.18 million barrels while gasoline and distillate inventories gained by a combined 3.15 million barrels. The Cushing fall would be first decline in over five weeks, if U.S. Energy Information Administration data confirms it.
Meanwhile, in the U.S., crude stockpiles probably rose by 1.5 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg.
“Thursday is going to be the next big test here,” Yawger said in anticipation of the EIA report. “Whichever number is bigger will be the way most likely that the market will trade to.”
To contact the reporter on this story: Jacquelyn Melinek in New York at firstname.lastname@example.org
To contact the editors responsible for this story: David Marino at email@example.com, Christine Buurma