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Oil prices rise as OPEC-led supply cuts expected to stabilise markets

Published 12/12/2018, 00:59
Updated 12/12/2018, 01:00
© Reuters. FILE PHOTO: A seagull flies in front of an oil platform in the Bouri Oilfield some 70 nautical miles north of the coast of Libya
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By Henning Gloystein

SINGAPORE (Reuters) - U.S. oil prices climbed on Wednesday, supported by expectations that an OPEC-led supply cut announced last week for 2019 would stabilise markets.

Disruptions to Libyan oil exports after local militia seized the country's biggest oilfield, El Sharara, were also buoying prices, traders said.

U.S. West Texas Intermediate (WTI) crude futures (CLc1) were at $52.15 per barrel at 0023 GMT, up 1 percent from their last settlement.

International Brent crude oil futures (LCOc1) had yet to trade.

Analysts said a decision by the Organisation of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including Russia to cut supply by 1.2 million barrels per day (bpd) would likely stabilise prices, although several said they did not expect the agreement to push markets much higher.

"OPEC production curbs will stabilise the market," ANZ bank said on Wednesday.

Crude prices had lost a third of their value between early October and the announcement of the cuts.

Fereidun Fesharaki of energy consultancy FGE said in a note that the OPEC-led cuts would likely be "insufficient to mop up the inventories in the targeted three-month period till the end of the first quarter of 2019".

As a result, FGE said prices were "likely to hover in the $55-60 per barrel range for Brent, with WTI sitting some $5-10 per barrel below this given current fundamentals".

Fawad Razaqzada, market analyst at futures brokerage Forex.com, said "additional doubts were raised after the decision to reduce output was made on Friday, when ... OPEC refused to specify which country would cut how much".

Undermining the supply cuts is soaring output in the United States, where crude production has hit a record 11.7 million bpd.

The United States is set to end 2018 as the world's top oil producer, ahead of Russia and Saudi Arabia, with the U.S. Energy Information Administration (EIA) saying on Tuesday that the nation's annualised average output would be 10.88 million bpd over the year.

The 2018 output increase would be 1.53 million bpd, the EIA said, adding that it expected production to average an unprecedented 12.06 million bpd in 2019.

© Reuters. FILE PHOTO: A seagull flies in front of an oil platform in the Bouri Oilfield some 70 nautical miles north of the coast of Libya

"U.S. oil production growth continues relentlessly and will probably continue for the foreseeable future to offset any supply-side adjustments from the OPEC+ group," Razaqzada said.

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