Crude Prices Boosted On US/China Trade Talks, OPEC Production Cuts
ORBEX | Jan 07, 2019 07:43AM ET
US crude oil inventories have started the year on a positive footing as the first industry data of the year has highlighted little change in stockpiles.
The latest weekly report by the Energy Information Administration, covering the week ending December 28, showed that US crude stockpiles grew by just 7000 barrels to end the week at 441.4 million barrels. The rise was disappointing for the market, which had forecast a more than 1 million barrel draw-down, though other factors kept price supported.
The report from the EIA also showed US gasoline inventories having risen by 6.9 million barrels over the week, far outperforming expectations of a 1.97 million barrel increase. Similarly, distillate stockpiles were also seen rising 9.6 million barrels over the week, again, sharply higher than the forecast 1.6-million-barrel build.
Further China/US Trade Talks Boosting Oil
Despite the unexpected, though admittedly minor, build in US crude inventories, crude prices have soared higher this year following news that US and China are to enter another round of trade talks. In a statement released by the Chinese Commerce Ministry on Friday, the Chinese government said that a further round of talks between the two sides will begin on January 7th/8th.
This comes as a relief to the market which is currently suffering from expectations of diminished growth over 2019. Recent declines in both US and Chinese manufacturing , with the latter having slipped into contractionary territory over the last month, have stoked concerns about the negative impact of the ongoing trade war. Given that China is the world’s largest importer of oil, any fears of a slowdown there, which have been building over recent months, can weigh heavily on oil prices.
OPEC Production Decreases Ahead of Official Output Cut
Crude oil prices have also been supported this week by positive news around OPEC. A Reuters survey released at the end of last week showed that supply from OPEC fell by 460k barrels per day over December last year. With OPEC due to begin its production cuts this month, news of a drawdown last month is a welcomed start. However, some industry analysts have cautioned that the majority of the decline in supply came from disruptions in Ira and Libya.
In emergency talks held at the end of last year, OPEC and a group of allied nations lead by Russia, agreed to cut production by over 1.2 million barrels per day starting in January and due to run for at least six months. However, the market has expressed concern about the ability of the group to effectively implement such cuts in a uniform way given the group’s historical difficulties with obedience.
Saudi Arabia Cuts Oil
However, there are positive signs as Saudi Arabia, the cartel’s de-facto leader, announced that it has slashed oil production and plans to reduce further over January. Saudi Arabia energy minister Khalid Al-Falih told reporters this week that the kingdom would cut oil production from 10.3 million barrels per day in December to 10.2 million barrels per day in January.
Get The News You Want
Technical Perspective
After trading down to test the structural resistance offered by a raft of prior swing lows at 42.25, just ahead of the completion of a large ABCD pattern, oil has since bounced sharply higher and is fast approaching a retest of resistance at the 50.96 level. Above here, the focus will be on a test of 55.91 and above there, a retest of the broken bullish trend line from 2015 highs.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.