Oil Gains as OPEC Sticks to Supply Cuts

Wednesday, February 27, 2019

OPEC cuts expected to remain despite Trump pressure. Separately, oil supported by unexpected drop in U.S. inventories.

Oil rallied for a second day on Wednesday, buoyed by an unexpected decline in U.S. crude inventories and after Saudi Arabia appeared undaunted by pressure from U.S. President Donald Trump on OPEC to prevent steeper price rises.

Saudi Energy Minister Khalid al-Falih said OPEC and its partners were "taking it easy" in response to a tweet from Trump on Monday that called on the group to slacken its restrictions on crude production.

"We are taking it easy. The 25 countries are taking a very slow and measured approach. Just as the second half of last year proved, we are interested in market stability first and foremost," Falih said in Riyadh when asked to comment on Trump's tweet, CNBC reported.

The oil price has risen by almost a quarter so far this year, after the Organization of the Petroleum Exporting Countries, together with other producers such as Russia and Oman, agreed to cut output to avoid the build-up of a global surplus, particularly as U.S. output has boomed.

Brent crude futures were up 91 cents on the day at $66.12 a barrel by 1255 GMT, while U.S. futures rose $1.13 to $56.63 a barrel.

"Donald Trump tweeted and OPEC replied. It was not the message he wanted to hear so the story is not over yet," PVM Oil Associates strategist Tamas Varga said.

Trump tweeted on Monday, warning about the threat of high oil prices and called on OPEC to "take it easy", which triggered the biggest one-day drop in the futures price so far this year.

"Trump's tweet is likely to have been sparked in particular by the sharp rise in US gasoline prices," Commerzbank said.

U.S. gasoline futures have risen by more than 16 percent in the last month, compared with a near-6 percent rise in U.S. crude futures.

Based on current market data, the so-called OPEC+ group is "likely to continue with the production cuts until the end of the year", a Gulf OPEC source told Reuters on Tuesday.

Russian energy minister Alexander Novak also said this week the oil market was more or less stable and price volatility, which is unwelcome to both producers and consumers, was low.

Also underpinning the oil market on Wednesday was a surprise drop in U.S. crude inventories, which fell by 4.2 million barrels in the latest week, according to the American Petroleum Institute. This compared with forecasts in a Reuters survey for a rise of 2.8 million barrels.

Official data will be released by the U.S. Energy Information Administration (EIA) after 1800 GMT on Wednesday.

"Crude oil futures bounced as OPEC members remained firm on planned production cuts despite heightened political pressure from U.S. President Trump early this week," said Benjamin Lu of Singapore-based brokerage Phillip Futures.


By Amanda Cooper

Categories: Contracts Logistics

Related Stories

One Shelf Drilling Rig Up for New Job in India, Other for Disposal

Four Jack-Up Drilling Rig Deals Set to Bring In $129M for Borr Drilling

PTTEP Hires Velesto’s Jack-Up Rig for Drilling Campaign off Malaysia

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

Petrovietnam, Partners Sign PSC for Block Off Vietnam

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Yinson Production, “K” LINE Target Europe's CCS with FSIU and LCO2 Solutions

CDWE Wraps Up Pin Pile Installation Job for Taiwanese Offshore Wind Farm

TPAO, SOCAR and BP to Ink Caspian Sea Oil and Gas Production Deal

Current News

One Shelf Drilling Rig Up for New Job in India, Other for Disposal

Four Jack-Up Drilling Rig Deals Set to Bring In $129M for Borr Drilling

PTTEP Hires Velesto’s Jack-Up Rig for Drilling Campaign off Malaysia

Yinson Production Secures $1.17B Refinancing for FPSO Maria Quitéria

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

Petrovietnam, Partners Sign PSC for Block Off Vietnam

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

CNOOC Signs Hydrocarbons Exploration and Production Deal with Kazakhstan

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Woodside and Jera Agree LNG Cargoes Supply for Japan’s Winter Period

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com