Oil rises to $56 on Saudi ex­port cut

Tehran Times - - ENERGY -

Oil rose to around $56 a bar­rel on Tues­day, sup­ported by Saudi Ara­bian ex­port cuts in Novem­ber and com­ments from OPEC and trad­ing com­pa­nies that the mar­ket is re­bal­anc­ing after years of over­sup­ply.

Saudi Ara­bia has cut Novem­ber al­lo­ca­tions by 560,000 bar­rels per day (bpd), in line with its com­mit­ment to an OPEC-led sup­ply re­duc­tion pact. In the United States, some pro­duc­tion re­mains of­fline fol­low­ing Hur­ri­cane Nate, lend­ing ad­di­tional sup­port.

“Prices have been boosted by news that Saudi Ara­bia is plan­ning to re­duce its oil ship­ments to cus­tomers in Novem­ber,” said Carsten Fritsch, an­a­lyst at Com­merzbank in Frank­furt.

Brent crude, the in­ter­na­tional price bench­mark, was up 32 cents at $56.11 a bar­rel at 0950 GMT. U.S. crude gained 29 cents to $49.87.

The Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries, Rus­sia and other non-mem­ber pro­duc­ers are cut­ting out­put by about 1.8 mil­lion bar­rels per day (bpd) un­til next March to get rid of a price-sap­ping sup­ply glut.

OPEC is in­creas­ingly con­fi­dent that the mar­ket is re­bal­anc­ing fast, helped by the cut­back as well as by stronger-than-ex­pected growth in global de­mand.

The chief ex­ec­u­tive of trad­ing firm Gun­vor, Tor­b­jorn Torn­qvist, also said the mar­ket was re­bal­anc­ing, cit­ing fall­ing prod­uct stocks and crude held in float­ing stor­age clear­ing up.

“We don’t see this mar­ket be­ing out of bal­ance one way or an­other,” he told the Reuters Global Com­modi­ties Sum­mit tak­ing place this week. Over­all crude stocks “are still high,” he added, and OPEC needed to stick to its out­put curbs.

Short-term price sup­port was com­ing from the United States, where 85 per­cent of U.S. Gulf of Mex­ico oil pro­duc­tion, or 1.49 mil­lion bpd, was of­fline fol­low­ing Hur­ri­cane Nate, ac­cord­ing to of­fi­cial fig­ures.

OPEC has man­aged record-high ad­her­ence to its sup­ply cut­ting deal this year and is con­sid­er­ing ex­tend­ing the deal be­yond its March 2018 ex­piry. Some an­a­lysts have been con­cerned that a price re­cov­ery could tempt pro­duc­ers to open the taps again.

But an­a­lysts at JP Mor­gan said this was less of an is­sue, say­ing “con­cerns that OPEC com­pli­ance would fade into the fourth quar­ter now ap­pear un­founded.”

“Stronger-than-as­sumed eco­nomic growth of­fers the po­ten­tial for tight mar­ket con­di­tions to con­tinue if OPEC ex­tends the cur­rent deal for an­other nine months,” the bank said.

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