Oil rises as Saudi forecast a decline in export in August

New York — Oil prices rose on Thursday after Saudi Arabia’s oil cartel Opec governor Adeeb Al-Aama said the kingdom’s crude exports will fall by about 100,000 barrels per day (bpd) in August, over-shadowing market pressure from a rising dollar and record high US crude production.

Brent crude oil rose 37c to $73.28 a barrel by 3.36pm GMT, previously reaching a session high of $73.79. US West Texas Intermediate (WTI) was $1.11 higher at $69.89. US crude prices had reached a session high of $70.17 earlier in the trading day.

Crude prices reached session highs after news came out that Saudi Arabia expected crude exports to drop by roughly 100,000 bpd in August as the kingdom limits excess production, al-Aama said in a statement. He said Saudi Arabia’s crude oil exports in July would be roughly equal to June levels. Despite international oil markets being well balanced in the third quarter, he said there would still be substantial stock draws due to robust demand.

“That really turned the momentum of the market around,” said Phil Flynn, analyst at Price Futures Group in Chicago. “It seems like now we’re probably going to see more volatility until we get a handle on production.”

Crude also strengthened on forecasts that inventories at the US oil delivery hub for WTI in Cushing, Oklahoma fell 1.8-million barrels, or 6.2%, up to Tuesday, traders said, citing energy information provider Genscape.

Still, oil prices have not yet broken through key technical levels that would suggest longer term increases, said Brian LaRose, senior technical analyst at ICAP Technical Analysis. “The news stories tend to knee-jerk the price reaction in one direction or another. Most of the time they don’t turn into sustainable trends.”

The rebound in oil prices occurred after falling earlier in the trading session as a strengthening dollar and talk of supply increases put downward pressure on prices. The dollar hit its highest level against a basket of other currencies since July 2017, up 0.5% on the day.

Brent has fallen about 7% from last week’s high above $79 on emerging evidence of higher production from Saudi Arabia and other members of Opec, as well as Russia and the US.

The US Energy Information Administration (EIA) said on Wednesday that domestic crude production had reached a record 11-million bpd last week. The US has added nearly 1-million bpd in production since November, thanks to rapid increases in shale drilling.

A sharp jump in US crude oil inventories also added to the bearish tone in the market. They rose 5.8-million barrels last week, compared with a forecast for a decline of 3.6-million barrels.

Meanwhile, Opec and non-Opec producers cut oil output in June by 20% more than agreed levels, compared with 47% in May, two sources familiar with the matter told Reuters on Wednesday.

Reuters

Source: businesslive.co.za