Oil Prices Extend Climb on Falling Supply
February 18 2019 - 6:51AM
Dow Jones News
By Christopher Alessi
-- Oil prices rose Monday morning, holding on to near three-month highs
reached at the end of last week amid a weaker dollar and signs of
shrinking global crude supply.
-- Brent crude, the global oil benchmark, was trading up 0.12% at $66.33 a
barrel on London's Intercontinental Exchange.
-- West Texas Intermediate futures, the U.S. oil standard, were up 0.74% at
$56.00 a barrel on the New York Mercantile Exchange.
HIGHLIGHTS
OPEC: Brent climbed by 6.7% last week, bolstered by fresh
evidence the Organization of the Petroleum Exporting Countries is
making good on its promise to cut crude production.
"OPEC and major producer compliance with the production limit
agreement have kept crude prices stable," said Alfonso Esparza,
senior market analyst at OANDA.
The oil cartel reported last week that its crude output had
fallen by nearly 800,000 barrels a day in January, to average 30.81
million barrels a day, driven by curbs from the cartel's de facto
leader Saudi Arabia. OPEC and 10 producers outside the group, led
by Russia, agreed late last year to cut crude production by a
collective 1.2 million barrels a day for the first six months of
this year.
U.S. Dollar: Prices have also been supported by a softer U.S.
dollar, which tends to have an inverse relationship with
dollar-denominated commodities like oil. The WSJ Dollar Index,
which measures the U.S. currency against a basket of 16 of its
peers, was down roughly 0.10% Monday morning. "Trade negotiations
between the U.S. and China are close to a breakthrough and have put
the greenback on the back foot," Mr. Esparza said.
INSIGHT
Sanctions: Oil prices have been undergirded by U.S. sanctions on
the oil industries of key OPEC members Iran and Venezuela. Those
countries were exempted from the latest OPEC-led production-cut
deal, but supply disruptions as a result of the sanctions are also
helping to bring down OPEC's total output.
"The supply side is currently driven by an OPEC+ member that is
very serious about trying to prop up this market [Saudi Arabia],
while the U.S. is actively limiting Venezuelan and Iranian oil
flows," analysts at consulting firm JBC Energy wrote in a note
Monday. "At least in the short-term, it would seem that not much
stands in the way of prices gunning for a test of $70 for Brent,"
they added.
AHEAD
-- The American Petroleum Institute, an industry group, on Wednesday
releases weekly data on U.S. oil inventories, followed by official
government data from the U.S. Energy Information Administration on
Thursday.
-- Oil officials and industry leaders are set to gather in London next week
for the annual International Petroleum Week.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
February 18, 2019 06:36 ET (11:36 GMT)
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