Published: Fri, March 15, 2019
Finance | By Loren Pratt

Oil wavers as OPEC pushes supply cut need, demand fears weigh

Oil wavers as OPEC pushes supply cut need, demand fears weigh

Crude oil is navigating levels last seen in mid-November 2018 further north of the $58.00 mark per barrel, always bolstered by a softer buck and a generalized better tone in the risk-associated complex.

Continued supply reductions would further support oil prices, which are up about 25 per cent this year, and incur the wrath of U.S. President Donald Trump, who has demanded OPEC ease its efforts to bolster the market.

Several factors contributed to the idea of a tightening market, including the Energy Information Administration reporting on Wednesday that US crude inventories fell by 3.9 million barrels last week.

Production is expected to increase 1.35 million bpd compared to the previous year, but will grow more slowly than the previous forecast of 1.45 million bpd.

Opec on Thursday cut the forecast of global demand for its oil this year as rivals boost production. Opec sources have said an extension of the pact is the likely scenario.

Supply disruptions out of OPEC members Venezuela and Iran helped support oil prices. Crude oil imports to the United States fell last week by 523,000 bpd to 6.4 million bpd.

Despite this strong compliance, market indicators followed by OPEC still suggest a glut could appear.

For 2020, the government said it expected U.S. crude oil demand to rise by 220,000 bpd to 21.03 million bpd, unchanged from previous forecasts. A recent EIA forecast also showed that the United States would become a net exporter of crude oil and petroleum products on a monthly basis in 2019 and on an annual basis in 2020.

Brent crude oil futures hit a 2019-peak of $68.14 per barrel on Thursday before easing modestly to $67.05 by 0840 GMT, up 50 cents or 0.74 percent from Wednesday's close.

The EIA data came after the American Petroleum Institute also said Tuesday that USA crude stocks had fallen in the previous week. On Sunday, Saudi oil minister Khalid Al-Falih said it would be too early to change OPEC+ output policy at the group's meeting in April.

At the moment the barrel of WTI is up 0.50% at $58.53 and a breakout of $59.63 (50% Fibo of the October-December drop) would open the door for $62.00 (200-day SMA) and then $63.74 (78.6% Fibo of the October-December drop).

"With the refiners starting to slowly come out of maintenance, OPEC cuts starting to kick in, and Venezuelan supplies, you're probably now looking at a future with more draws in the coming weeks", said Phil Flynn, analyst at Price Futures Group in Chicago.

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