Oil rises on fears of output cut by OPEC

Saudi Arabia to keep Aug-Sept oil exports below 7 mln bpd

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NEW YORK/LONDON/SHANGHAI/ DUBAI: Oil jumped more than $1 per barrel on Thursday on expectations that falling prices could lead to production cuts, coupled with a steadying of the yuan currency after a week of turmoil spurred by an escalation in US-China trade tensions. Brent crude was up $1.35, or 2.4%, at $57.58 a barrel by 11:07 a.m. (1507 GMT), after hitting a session high of $58.01.
China›s yuan strengthened against the dollar and its exports unexpectedly returned to growth in July on improved global demand despite US trade pressure. The dollar fell 0.2% against the offshore yuan. Today›s price rebound across the energy spectrum looks like a normal correction from a short-term oversold technical condition, Jim Ritterbusch of Ritterbusch and Associates said in a note.
While some Saudi overtures of additional output restraint, a softening US dollar and lift in global risk appetite are facilitating today›s rally, we are not viewing this as the beginning of a sustainable advance by any measure. Reports that Saudi Arabia, the world›s biggest oil exporter, had called other producers to discuss the slide in crude prices have helped supported the market, traders and analysts said.
Saudis are scrambling to send a signal that will stabilize oil markets … With energy prices heading for the worst weekly close since December, we should not be surprised to hear more rumors that OPEC may be considering increased production cut efforts ahead of key summit that is tentatively planned for the second week in Abu Dhabi, said Edward Moya, senior market analyst at OANDA in New York.
Persistent worries about demand growth have weighed on global oil markets, particularly as the world›s two biggest economies are locked in a trade row. Crude oil shipments into China, the world›s largest importer, in July rose 14% from a year earlier as new refineries ramped up purchases. Fuel exports continued to climb as supply outstripped demand in the world›s second-largest oil consumer.
Saudi Arabia plans to keep its crude oil exports below 7 million barrels per day in August and September despite strong demand from customers, to help drain global oil inventories and bring the market back to balance, a Saudi oil official said. Geopolitical tensions over the safety of oil tankers passing through the Persian Gulf remained unresolved as Iran refused to release a British-flagged tanker it seized last month. The US Maritime Administration said US-flagged commercial vessels should send their transit plans for the Strait of Hormuz and Gulf waters to US and British naval authorities, and that crews should not forcibly resist any Iranian boarding party.
Saudi Arabia plans to keep its crude oil exports below 7 million barrels per day in August and September despite strong demand from customers, to help drain global oil inventories and bring the market back to balance, a Saudi oil official said. State-owned Aramco’s oil nominations the requests made by refiners and customers for Saudi crude were high in September, a sign of healthy oil demand globally, the Saudi official, who asked not to be named, said on Thursday.
Despite that, the kingdom is maintaining its oil production below 10 million bpd and keeping its exports below 7 million bpd in both August and September, he said. Demand was universally stronger, in all regions. But we kept exports below 7 million bpd, the official said. If we satisfy September demand we will produce about 10.3 million bpd because demand is much higher, but we decided to keep production and exports flat and cut customer requests by 700,000 bpd. Saudi Arabia’s production target under an output-cutting deal among the Organization of the Petroleum Exporting Countries and allies a grouping known as Opec+ is 10.3 million bpd.
In July, Opec and allies led by Russia agreed to extend oil output cuts until March 2020 to prop up the price of crude as the global economy weakens and US production soars. Saudi Arabia is committed to do whatever it takes to keep the market balanced next year, the official said. We believe, based on close communication with key Opec+ countries, that they will do the same. The (oil market) fundamentals are good, especially on the supply side, due to a combination of strong Opec+ over-compliance, and a lower than previously expected US outlook, the official said.
Brent crude was trading at $56.91, up 68 cents or 1.2 per cent, at 1141 GMT on Thursday. The EIA on Tuesday lowered its domestic oil growth forecasts for the year after Hurricane Barry disrupted Gulf of Mexico output in July. Production is set to rise by 1.28 million bpd to 12.27 million bpd this year, slightly lower than previous growth forecast of 1.40 million bpd.

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