Oil Falls But Logs Big Weekly Gain
January 11 2019 - 4:13PM
Dow Jones News
By Dan Molinski
-- Oil prices declined Friday, ending a nine-session streak of
increases as a retreat in U.S. stock markets reduced risk appetite
and spurred profit-taking. But the U.S. crude-oil benchmark still
ended the week nearly 8% higher, as production cuts by major
producers, a weaker dollar and further export declines from
sanctioned Iran buoy prices.
-- West Texas Intermediate futures, the U.S. oil standard, ended
1.9% lower at $51.59 a barrel on the New York Mercantile Exchange.
Friday's decline was the first since late December and put an end
to the longest upward streak in nine years.
--Brent crude, the global oil benchmark, ended 1.9% lower at
$60.48 a barrel on London's Intercontinental Exchange.
HIGHLIGHTS
Comeback:Despite Friday's modest retreat in prices, oil has made
a sizable comeback from Dec. 24, when prices closed at an 18-month
low of $42.53 a barrel. "A major bull-run is still far from
formulating, and prices are still close to 30% lower than the
recent highs in October," said Robbie Fraser, global commodity
analyst at Schneider Electric. "For the near-term, however, the
OPEC+ cuts, the continuous drop in Iranian exports, and a weaker
dollar could help support crude prices."
Fed-Led Demand:
Analysts at Bank of America Merrill Lynch said near- to
medium-term support for oil is coming from supply management as
they pointed to OPEC cuts, Iran's struggles and less-robust U.S.
oil production. They see year-over-year global oil supply growth of
just 400,000 barrels a day in 2019, "and a deficit building into
the summer months." After that, the Federal Reserve may help
support oil prices. "An eventual shift in the U.S. monetary
tightening path in the coming months could lead to a weaker dollar
this year, a risk-on rally, and a major uplift in inflation assets
like oil into the summer," the analysts said. "We are constructive
on oil because the Saudi (supply) put was triggered and see a Fed
(demand) put eventually kicking in too."
INSIGHT
Bullish Venezuela: Economic woes in socialist-run Venezuela has
reduced the OPEC-member's oil industry to a shell of what it once
was, a factor that has long been bullish for oil prices as it means
less crude oil to fill the global tank. Thursday's swearing-in of
President Nicolás Maduro to a second, six-year term means
Venezuela's struggles with oil production, exports, refining and
every other part of the industry will just keep trudging along,
said Eurasia Group's Risa Grais-Targow. "Oil production is likely
to further decline from its current level of 1.1M bpd (even if at a
slower rate since remaining production is now primarily join
ventures)," she said. "And any oil-related sanctions from the U.S.
would further complicate cash-flow." Venezuela's socialist
revolution is now nearly 20 years old, and while Ms. Grais-Targow
thinks Mr. Maduro remains vulnerable, she says that for now "we see
no indication of a catalyst for political change."
AHEAD
--The Energy Information Administration will release its weekly
report on U.S. oil inventories next Wednesday, preceded by a
private report on inventories Tuesday by industry group The
American Petroleum Institute.
Christopher Alessi contributed to this article.
Write to Dan Molinski at Dan.Molinski@wsj.com
(END) Dow Jones Newswires
January 11, 2019 15:58 ET (20:58 GMT)
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