Oil falls below $52, little changed a week after OPEC+ cuts
NEW YORK (Bloomberg) -- Oil traded below $52/bbl in New York, just striking distance from where it trended a week ago after OPEC and its allies announced output cuts, as traders weighed incremental U.S. shale growth against softer demand for 2019.
Saudi Arabia’s plan to slash exports to the U.S. next month is shoring up expectations that the Organization of Petroleum Exporting Countries and its partners will deliver on last week’s promise to curb production by 1.2 MMbpd. Yet the oil market appears to have largely ignored cuts agreed just a week ago, concerned by the relentless growth from U.S. shale, which veteran crude trader Andy Hall says is making it hard to predict the market’s direction.
“The market may have to wait for OPEC to get the job done this time, given the perception that OPEC+ was unable to cut enough to reduce the surplus expected,” said Michael Cohen, head of energy markets research at Barclays in New York.
Crude has traded in the narrowest range since early 2017 so far this month as investors assess the production cuts pledged by the so-called OPEC+ coalition. The International Energy Agency said unplanned outages in OPEC’s member states may double its intended curbs. Still, the market is concerned that prolific production from the Permian shale field from West Texas and New Mexico may quash any price rallies.
"We really had a blowout day yesterday with the strong rally," said Bob Yawger, director of the futures division at Mizuho Securities USA. "I don’t think the headlines supported it so today’s move is more so a pullback to compensate."
West Texas Intermediate for January delivery fell $1.02 to $51.56/bbl on the New York Mercantile Exchange at 10:50 a.m. local time. The contract closed Thursday’s session up $1.43 at $52.58/bbl. Total volume traded Friday was 8 percent below the 100-day average.
Brent for February settlement fell $.083 to $60.62/bbl on London’s ICE Futures Europe exchange, after gaining 2.2% on Thursday. The global benchmark crude traded at an $8.80-a-barrel premium to WTI for the same month.
Market uncertainty
While it’s become more difficult for traders to assess the market, those seeking to pick a trend should probably bet that oil will rebound from its recent 30% plunge, said Hall, once nicknamed “God” for his lucrative calls on crude.
Saudi crude shipments to the U.S. next month could test the 30-year low set in late 2017 of 582,000 bpd, down about 40% from the most recent three-month average, according to people briefed on the plans of the kingdom’s state oil company. The final figure could still change, they added.
Other oil-market news: Gasoline futures fell $0.339 to $1.443/gal. Nexen’s North Sea Oil Field Buzzard Is Said to Be Restarting. China bought huge amounts of Middle Eastern and West African crude as oil prices were collapsing in November. Proposed Harbor Island VLCC Port to Link to EPIC, Harvest Pipes
