Oil gains as Russia, Saudis signal commitment to production cuts
NEW YORK (Bloomberg) -- Oil closed higher for the second straight day as Russia and Saudi Arabia signaled they’re on track with production cuts designed to avoid a global supply glut.
Futures in New York staged a mid-afternoon recovery on Wednesday to top $52/bbl, shrugging off bearish U.S. demand data. Russia will meet its target for curbing output in April as part of its agreement with OPEC, the country’s deputy energy minister told reporters. That followed a U.S. report showing Saudi Arabia slashed shipments to American refiners by a third last week.
Whether the OPEC+ alliance can offset surging American output “is absolutely critical to where we go in the next few weeks,” Nick Holmes, a director at Leawood, Kansas-based money manager Tortoise, said in an interview.
Prices also edged higher as U.S. equities rallied on encouraging corporate earnings and U.K. Prime Minister Theresa May survived a no-confidence vote to remain leader of Europe’s second-largest economy.
West Texas Intermediate for February delivery rose 20 cents to settle at $52.31 on the New York Mercantile Exchange. It had slipped as much as 1.6% earlier in the session after the U.S. Energy Information Administration reported a big jump in fuel stockpiles.
Brent for March settlement advanced 1.1% to $61.32 on the London-based ICE Futures Europe exchange. The global benchmark traded at an $8.71 premium to WTI for the same month.
Crude has surged back into bull-market territory after shedding almost 40% during the final three months of 2018. The momentum has been spurred by improving trade relations between the U.S. and China, as well as the start of output curbs by Saudi Arabia and other major producers. Still, prices remain more than 30% below their early October level.
The Saudi kingdom’s energy minister on Wednesday said he was sure the plan will return global supplies to “normal averages” and “increase confidence” in the market.
The EIA said stockpiles of gasoline climbed by 7.5 MMbbl last week -- twice the jump analysts had forecast -- while American oil drillers pumped a record 11.9 MMbpd. At the same time, Saudi sales to U.S. refiners fell by 32% in the week ended Jan. 11.
