Oil snaps record losing streak as stronger Opec cuts seen likely

Crude in the US dipped below US$55 a barrel this week for the first time in a year amid renewed fears of a glut.
Crude in the US dipped below US$55 a barrel this week for the first time in a year amid renewed fears of a glut.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Oil rose, ending its 12-day run of declines amid signals that Opec and allied producers are considering production cuts as soon as next year.

Futures in New York clung to gains on Wednesday (Nov 14), even as the industry funded American Petroleum Institute was said to report that US crude stockpiles rose by 8.79 million barrels last week. Meanwhile, Opec and its partners are said to be discussing a deeper-than-anticipated output cut. Cartel President Suhail Al Mazrouei said Wednesday that supplies will be curtailed as needed to balance the market.

"A lot of folks threw in the towel and got as bearish as can be so now it was ripe for us to at least attempt to move back higher," said John Kilduff, a partner at New York-based hedge fund Again Capital LLC. Signals of impending supply cuts "helped stock the bullish spirits back in here for the first time in a while."

Crude in the US dipped below US$55 a barrel this week for the first time in a year amid renewed fears of a glut, with domestic production at record-highs, rising Opec output and waivers intended to ease the impact of sanctions against Iran. Inventories in industrialized nations have expanded for four straight months and are set to continue rising, according to the International Energy Agency.

West Texas Intermediate for December delivery traded at US$56 a barrel at 4:59pm after ending the session at US$56.25 on the New York Mercantile Exchange. The contract sank 7.1 per cent on Tuesday, the biggest one-day decline in more than three years. Total volume traded was about 61 per cent above 100-day average.

In terms of technical indicators, WTI has remained below its 200-day moving average since late October. The US benchmark's 50-day moving average crossed below its 100-day moving average earlier this week, another bearish signal.

Brent for January settlement gained 65 cents to settle at US$66.12 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a US$9.68 premium to WTI for the same month.


Producers need to cut about 1 million barrels a day from October production levels, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi on Monday. The kingdom will reduce shipments by about half that amount next month.

US crude inventories probably rose by 3.2 million barrels last week, according to a Bloomberg survey of analysts. Meanwhile, supplies at the key storage hub in Cushing, Oklahoma, expanded by an estimated 2.5 million barrels, according to a separate forecast compiled by Bloomberg.

"Most analysts are predicting a build in crude," said Thomas Finlon, director at Energy Analytics Group Ltd. "With a build, I think it's reasonable that at least this afternoon the market came off a little bit."

The API is said to report that gasoline probably rose by 188,000 barrels last week, while distillate supplies declined by 3.22 million barrels last week.