Oil rises as lower out­put tight­ens mar­ket

The Pak Banker - - MARKETS/SPORTS -

Oil prices rose over 1 per­cent on Tues­day, shrug­ging off a slump in China's man­u­fac­tur­ing sec­tor that stirred fears of slow­ing de­mand growth, with mar­kets in­stead fo­cus­ing on a fall in U.S. and OPEC out­put that might tighten an oth­er­wise bloated mar­ket.

US crude fu­tures were trad­ing at $34.22 per bar­rel at 0739 GMT, up 47 cents from their last set­tle­ment. Prices are up 30 per­cent from Feb. 11, when the con­tract dropped to an intra-day low of $26.05 a bar­rel, the low­est since 2003. ANZ bank said that a break above $34 would "add to the view for some that the bot­tom in the crude oil mar­ket is now in place". In­ter­na­tional bench­mark Brent crude fu­tures were up 40 cents at $36.97 per bar­rel, and up over 20 per­cent since Feb. 11. Prices ini­tially slumped in Asian trad­ing af­ter China pub­lished sur­pris­ingly weak man­u­fac­tur­ing data, but traders said he mar­ket later fo­cused on more bullish oil sup­ply and de­mand fun­da­men­tals, es­pe­cially dip­ping pro­duc­tion in the United States and the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries (OPEC).

US govern­ment data this week showed crude out­put last De­cem­ber fell for a third straight month by 43,000 bar­rels per day (bpd) to 9.26 mil­lion bpd, its low­est in a year. Al­though av­er­age an­nual 2015 crude pro­duc­tion of 9.43 mil­lion bpd was still 720,000 bpd above the pre­vi­ous year.

Sup­ply from OPEC has also de­clined, fall­ing by 280,000 bpd in Fe­bru­ary to 32.37 mil­lion bpd, ac­cord­ing to a Reuters sur­vey based on ship­ping data and in­for­ma­tion from sources at oil com­pa­nies, OPEC as well as from con­sul­tants.

How­ever, weak eco­nomic data out of China and the prospect of slow­ing oil de­mand growth pre­vented more price rises. "Crude oil de­mand growth ap­pears to be slow­ing," Mor­gan Stan­ley said on Tues­day. China's fac­to­ries shed jobs at the fastest rate in seven years in Fe­bru­ary as ac­tiv­ity shrank to five-month lows, a pri­vate sur­vey showed.

"With trans­porta­tion and gaso­line de­mand de­cel­er­at­ing, es­pe­cially in China... prod­uct builds and ex­ports could lead to weaker refining mar­gins glob­ally and less crude de­mand," the bank said.

At the same time, dis­cus­sions among ma­jor oil pro­duc­ers, in­clud­ing Saudi Ara­bia and Rus­sia, agree­ing to a pro­duc­tion freeze are un­likely to re­duce a global over­hang in sup­ply of well of over 1 mil­lion bpd, other an­a­lysts said.

"The prospect of a de­tente be­tween two of the largest oil pro­duc­ers in the world (Saudi Ara­bia and Rus­sia), al­ready at log­ger­heads over the Syria con­flict, was al­most too good to be true," Sin­ga­pore Ex­change (SGX) said in a monthly note on Tues­day. "Alas, this turned out to be the case with the meet­ing yield­ing no more than a pro­duc­tion freeze sub­ject to com­pli­ance from Iran and Iraq. A pro­duc­tion freeze is noth­ing near to a pro­duc­tion cut," it added.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.