Oil prices increase as fears of tighter supply diminish

27 December, 2018, 06:41 | Author: Kevin Carter
  • India will surpass China as the fastest-growing Asian market for petroleum products in 2018.|PTI

"U.S. equity futures are trading a bit firmer this morning triggering some little buying interest in the oil markets", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore. Despite lingering concerns about a global economic slowdown, US WTI futures were up 0.33 percent as of 2:06 p.m. HK/SIN, to trade at $42.68 per barrel. The U.S. benchmark is down about 16 percent since the producer group announced the agreement. The declines were led by Hess Corp., which lost 8.4 percent, the most in nearly three years, after Venezuelan forces temporarily halted ships working at a formation Hess and ExxonMobil are developing offshore Guyana. However, the market seems to be ignoring this move as oil prices are continuously falling in the global market despite this production cut.

The macroeconomy and its impact on oil demand continue to put pressure on prices.

The makers' partnership, known as OPEC+, plans to bring down yield by 1.2 million barrels for each day, of which OPEC's offer is 800,000 bpd, one year from now, and a few priests have even proposed making further move.

Broader financial markets have been under pressure on worries about a global economic slowdown amid higher USA interest rates and the U.S. That follows the United Arab Emirates energy minister's remarks signaling the producers could have an extraordinary Opec meeting and discuss additional curbs if needed.

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"I think there is a smidgen of over-expansion to the drawback connected to worldwide market fears", said Olivier Jakob, examiner at Petromatrix. Concerned that a new glut could take shape, Opec and its allies, including Russian Federation, decided earlier this month to return to cutting production in 2019, unwinding a decision taken in June 2018 to pump more oil. "For now, those statements are ignored by the market because we are in this bearish cycle". While there are many sectors such as tyre, chemicals, paints, airline etc. which use crude oil as their major raw material would be benefiting from oil prices.

West Texas Intermediate for February delivery fell $1.41 to $44.18 a barrel. The contract slumped $3.06 to $42.53 on Monday.

Brent for February settlement added $4 to settle at $54.47 a barrel on the London-based ICE Futures Europe exchange after earlier dropping to as low as $49.93, the first time the benchmark has dipped below $50 a barrel since July 2017.

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