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U.S. oil prices extend gains as equities rise, but economic worries weigh

27 December, 2018, 06:38 | Author: Shawna Walton
  • Opec president Suhail al Mazrouei says there is a surplus of only 26 million barrels of oil in the market now. – EPA pic

Continued growth in USA crude production, notably by shale-oil producers, also has contributed to worries about a growing glut worldwide.

At the same time, the growth in non-OPEC supply appears to have stalled as updates from the U.S. Energy Information Administration (EIA) show production holding steady at 10,600K in the week ending December 14, and signs of slowing output may foster a near-term correction in crude especially as the International Energy Agency (IEA) warns that the economic slowdown in Venezuela paired with the sanctions on Iran may lead to unintended consequences that would exacerbate the drop in global output.

The fourth-quarter price decline is likely to cause producers to throttle back on their output, he said. The U.S. benchmark is down about 16 percent since the producer group announced the agreement. Even with the day's gains, United States crude has still lost almost 40 per cent from its October closing high at more than US$76 a barrel.

Stock-market gains, including a more-than-1,000-point gain for the Dow industrials DJIA, +4.98% and comments on improved stability for global supplies by Russia's top energy official, supported prices as markets resumed action.

"The demand outlook continues to be called into question". The chance of an extraordinary meeting by OPEC and its allies is "sending a signal to the market that they will do whatever it takes".

Investors globally anxious about economic slowdown amid higher US interest rates and the US-China trade dispute.

"The main input over the weekend has been the continued intervention by OPEC members", said Olivier Jakob, managing director at Petromatrix.

Concerned that a new glut could form, OPEC and its allies including Russian Federation decided earlier this month to return to a policy of cutting production in 2019, unwinding a decision taken in June 018 to pump more oil.

Global crude oil prices, after having been benign and lending a helping hand to India's fisc, turned around in 2018 to spook the fiscal math. The U.S. benchmark on Monday finished at the lowest for a front-month contract since July 21, 2017, and remains down roughly 9.25% so far this month, according to Dow Jones Market Data. WTI futures are down about 42 percent from an early-October high near $77 a barrel.

Brent for February settlement declined as much as 54 cents to $49.93 a barrel on the London-based ICE Futures Europe exchange, before paring losses to trade at $51.05 at 11:15 a.m.in London.

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