Oil rises as US crude supply falls, OPEC nations begin cuts

Bloomberg

Oil rose amid projections that US crude inventories declined while OPEC and other producers implement promised production cuts.
Futures rebounded after tumbling 2.6 percent Tuesday. US stockpiles probably fell by 2 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Thursday. While OPEC member Kuwait has already cut output and non-member Oman said it would follow suit this month, rising production elsewhere could blunt the impact of accords to curb supply. Price gains accelerated as US equities advanced and the dollar slipped, boosting investor demand for commodities priced in the currency.
“After the big drop the time has come to get back into the market,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “We’re waiting to see if there are going to be drops in inventories, which are still very high.”
Oil last year capped its biggest annual gain since 2009 as the Organization of Petroleum Exporting Countries and 11 nations from outside the group agreed on a plan to reduce production. Libya, which along with Nigeria is exempt from the supply deal, is increasing output from its biggest oil field after two years of internal conflict.
West Texas Intermediate for February delivery rose 93 cents, or 1.8 percent, to settle at $53.26 a barrel on the New York Mercantile Exchange. Total volume traded was 15 percent below the 100-day average at 2:41 p.m. The contract touched $55.24 Wednesday, the highest since July 2015, before retreating. Prices rose 45 percent last year. Futures climbed from the settlement after the industry-funded American Petroleum Institute was said to report US crude stockpiles fell by 7.43 million barrels last week. February WTI traded at $53.30 at 4:40 p.m. in New York.

OPEC CUTS
Brent for March settlement advanced 99 cents, or 1.8 percent, to $56.46 a barrel on the London-based ICE Futures Europe exchange. Prices advanced 52 percent in 2016, the first gain in four years. The global benchmark crude closed at a $2.24 premium to March WTI.
OPEC’s crude production fell by 310,000 barrels a day in December, as unplanned disruptions in Nigeria reduced supply before deliberate cuts took effect this month. OPEC — excluding Indonesia which suspended its membership on Nov. 30 — pumped 33.1 million barrels a day last month, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data.
Under the terms of OPEC’s agreement, the group’s total output including Indonesia would fall to 32.5 million barrels a day. Compliance with that target will be judged against independent estimates compiled by OPEC, which can vary from the Bloomberg News survey.
US crude stockpiles were at 486 million barrels in the week ended Dec. 23, the highest seasonal level in more than three decades, according to weekly data compiled by the Energy Information Administration since 1982. The forecast decline would be the first drop in three weeks. “I don’t expect any big moves after yesterday’s big reversal,” Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania, said by telephone. “Unless there’s an unexpected headline, we will probably wait until tomorrow’s report before making a big move.”
Libya is re-opening its last major oil-export terminal that was shut down by conflict. The nation’s oil production has now risen to 700,000 barrels a day, according to National Oil Corp. Statoil ASA said it would boost exploration for the first time since 2013 as cost cuts and lower supplier fees allow it to get more done for less.

NIGERIA DISRUPTION
OPEC’s crude production had
fallen by 310,000 barrels a day in
December, as unplanned disruptions in Nigeria reduced the group’s
supply before deliberate cuts take effect this month.
Nigeria’s daily output dropped by 200,000 barrels to 1.45 million in December, ending three months of gains as the African nation struggled to restore capacity after a year of militant attacks on oil infrastructure. Saudi Arabia’s production fell by 50,000 barrels a day while Venezuela declined by 40,000.
“Crude production in Nigeria in December was once again severely impacted, mostly due to a field maintenance as well as a strike of port workers,” Amrita Sen, chief oil analyst at London-based consultant Energy Aspects Ltd., said by e-mail.
The decline in December comes as OPEC, which controls around 40 percent of global supply, is planning to curb output in a bid to boost oil prices. The organization reached a historic deal last month with Russia and other non-members to cut global production by almost 1.8 million barrels a day starting this month.
Brent crude, the global benchmark, advanced 52 percent last year, the biggest annual gain since 2009. Prices were down 0.3 percent at $56.31 a barrel as of 6:39 a.m. London.
Overall, the Organization of Petroleum Exporting Countries — excluding Indonesia which suspended its membership on Nov. 30 — pumped 33.1 million barrels a day in December, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. That compares with a November total of 33.41 million barrels a day for the 13 continuing members of the group, or 34.14 million including Indonesia’s daily output of 730,000 barrels.