Oil gets a boost from Saudi output pledge, declining US inventories

Oil gets a boost from Saudi output pledge, declining US inventories

Oil gets a boost from Saudi output pledge, declining US inventories

Crude futures pared gains after USA government data showed a rise in the nation's crude and fuel stockpiles, contradicting an earlier industry report indicating oil inventories declined.

Refineries are built to handle a certain quality of crude, and those which process so-called heavy crude from Venezuela, Canada or the Middle East can not be easily converted to treat the light shale oil that is now being produced in greater quantities in the United States.

Furthermore, the report affirmed that in 2019, demand for OPEC crude is forecast at 30.6 mb/d, around 1.0 mb/d lower than the 2018 level.

Brent crude futures were up $0.77 at $63.19 a barrel by 1225 GMT while United States crude oil futures rose $0.53 to $53.63 a barrel.

Brent for April settlement advanced 53 cents to $62.95/bbl on the London-based ICE Futures Europe exchange, after adding 1.5% on Tuesday.

The EIA raised its forecast of 2019 US oil production by 340,000 barrels a day, with more than a third of that coming from the Gulf of Mexico and the increase heavily skewed to the second half of the year.

"Oil is rallying further as investors were given confirmation that the Saudis will curtail output, and they see a lower chance of the trade tensions escalating at the moment", said Kim Kwangrae, a commodities analyst at Samsung Futures Inc.in Seoul.

"It's a little bit on the bearish side", Saal said. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. The world's biggest crude exporter will continue to curb output more than required by a December deal among top producers, Energy Minister Khalid Al-Falih told the Financial Times Wednesday.

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OPEC said on Tuesday that it had cut its output by nearly 800,000 bpd in January to 30.81 million bpd.

"The feel-good factor is back in play, but oil bulls are by no means out of the woods yet", PVM Oil Associates' Stephen Brennock said.

"It is a well-known fact that the world economy is losing momentum amid a plethora of downside risks including lingering U.S".

Growing U.S. supply and a potential economic slowdown this year could also cap oil markets.

Oil prices rose on Tuesday amid OPEC-led supply cuts and US sanctions against Iran and Venezuela, although analysts expect surging USA output and concerns over economic growth to keep markets in check.

That was the message from the International Energy Agency (IEA) in its latest Oil Market Report. "In quality terms, it is more complicated".

USA crude output is expected to grow by 1.45 million bpd this year and by another 790,000 bpd next year to hit 13 million bpd in 2020, according to the EIA.

The cartel has joined forces with 10 non-member nations including Russian Federation to trim output to avoid a repeat of the 2014 crash when prices dove to below $30 a barrel - down from over $100 - due to a glut in supplies and weakening global demand.

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