Oil Gains After Stockpiles-Driven Fall
December 07 2017 - 5:55PM
Dow Jones News
By Christopher Alessi
Oil prices rose Thursday after closing at a three-week low,
helped by a reduction in U.S. crude stockpiles.
Light, sweet crude for January delivery gained 73 cents, or
1.3%, to $56.69 a barrel on the New York Mercantile Exchange.
Brent, the global benchmark, rose 98 cents, or 1.6%, to $62.20 a
barrel.
On Wednesday, the U.S. Energy Information Administration
released weekly data showing a 5.6 million-barrel drop in crude
inventories in the week ended Dec. 1. However, an unexpectedly
large build in gasoline stockpiles, as well as record weekly output
from shale companies, sparked a selloff in the energy market.
"This is just a technical rebound after yesterday's fall," said
Eugen Weinberg, head of commodity research at Commerzbank AG.
Mr. Weinberg said he expects prices to continue to fall in
coming months on rising U.S. oil output.
"The most important factor is not OPEC, it's shale production
from the U.S.," he said.
Last week, the Organization of the Petroleum Exporting Countries
agreed with other major producers, including Russia, to extend an
agreement to curb crude oil output by nearly 2% through the end of
next year. Prices received only a minor boost following the
decision, as an extension had been largely priced in by the
market.
OPEC and 10 producers outside the cartel first agreed a year ago
to cap production at 1.8 million barrels a day below peak October
2016 levels, with the aim of both alleviating a global supply glut
that has weighed on the market since 2014 and boosting prices.
Crude prices have risen more than 20% since September amid
stronger compliance with the OPEC-led deal, along with growing
global demand and renewed geopolitical risks in the Middle
East.
"Last week's OPEC/non-OPEC meeting now looks like ancient
history," said Tamas Varga, an analyst at brokerage PVM Oil
Associates Ltd., in a note Thursday. "The meltdown that took place
yesterday, however, provided us with a warning signal that it is
not only OPEC and its 10 non-OPEC allies that play an important
role in the formation of oil prices," he added.
Rising U.S. production has pressured oil prices this year, but
Capital Economics analysts said output forecasts may be too
optimistic.
"It seems doubtful that U.S. producers will be able to maintain
current levels of growth beyond 2018 as constraints on output start
to kick in which should prevent prices falling further," said
Thomas Pugh, commodities economist at Capital Economics, in a
Thursday note.
Gasoline futures gained 2.4% to $1.7000 a gallon and diesel
futures advanced 1.9% to $1.8970 a gallon.
Stephanie Yang contributed to this article.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
December 07, 2017 17:40 ET (22:40 GMT)
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