Oil gains on Saudi commitment
Saudi Arabia says it will cut output throughout 2018
Oil prices rose more than 1 per cent yesterday to extend gains from the previous session, lifted by a weak dollar and Saudi comments that it would rather see an undersupplied market than end a deal with Opec and Russia to withhold production.
US West Texas Intermediate (WTI) crude futures were up 84 cents, or 1.4 per cent, from their last settlement at $61.44 a barrel at 0604 GMT, adding to a 2.4-per cent gain from the day before.
Brent crude futures were at $65.05 (Dh238.73) per barrel, up 69 cents, or 1.1 per cent, extending Wednesday’s 2.6-per cent climb.
Prices rose on the back of ongoing weakness in the US dollar against other leading currencies, further supported by rising stock markets, traders said.
A weaker greenback potentially Just over a year into production cuts lead by Opec and Russia, oil markets in Asia have tightened noticeably as significant amounts of excess crude have been taken off tankers used for storage and delivered to customers across the region.
Shipping data shows about 15 super-tankers are currently filled with oil floating off the coasts of Singapore and surrounding Malaysia, Asia’s main trading and storage hub for crude coming from the Middle East to Asia. That’s slightly less than last November, and half the number of tankers used for storage in mid-2017.
Traders say onshore tanks in the region, including at Vopak’s site in Johor, Malaysia, are also not booked out anymore, marking a turnaround from 2016-17 when a situation known as tank-top was feared in which oil markets are so bloated that they run out of storage. stokes consumption of dollar-denominated commodities as it makes fuel and raw materials cheaper for countries using other currencies.
“On commodity markets, everyone loves a lower US dollar,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
More fundamentally, oil markets got a push from comments by Saudi Arabia, the de facto leader of the Organisation of Petroleum Exporting Countries [Opec], voicing support for output cuts backed by Opec and other producers including Russia since 2017 in an effort to tighten the market and prop up prices.
“If we have to err on overbalancing the market a little bit, so be it,” Saudi Energy Minister Khalid Al Falih said on Wednesday. “I think we are going to be sticking with our policy [to withhold production] throughout 2018.” Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, said.