Markets

Oil hovers near 2019 highs amid OPEC cuts

Oil hovers near 2019 highs amid OPEC cuts

-Brent crude, the global oil benchmark, was trading up 0.7% at $67.52 a barrel on London's Intercontinental Exchange.

USA crude production last week climbed to a record 12 million barrels per day as stockpiles built for a fifth straight week to their highest since October 2017 and exports hit an all-time high, the Energy Information Administration said on Thursday. "Anything positive on trade talks will boost the oil price".

U.S. commercial crude oil inventories increased by 3.7 million barrels from the previous week to 454.5 million barrels, the U.S. Energy Information Administration said Thursday, which marked the highest level since October 2017.

Some analysts were quick to point out that oil prices would likely have climbed above 2019 highs but concerns over a slowdown in global economic growth have left investors skittish.

US crude stocks rose 3.7 million barrels in the week to February 15, to 454.5 million barrels, the highest since October 2017, even as crude exports surged 1.2 million barrels per day to a record 3.6 million bpd.

As for the USA shale juggernaut, Kevin O'Brien, chief business officer at Orbital Insight, told Bloomberg television that inventories stateside have climbed about 3 percent in the past 30 day, s "and we're thinking there will continue to be a build up in the actual inventory, driven in part by the shale operators".

U.S. President Donald Trump is scheduled to meet with Chinese Vice Premier Liu He in the White House today, with the goal of reaching a trade deal ahead of a March 1 deadline.

Analysts say that the United States output will increase further and oil firms will raise exports to shift surplus stocks.

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At the same time, the USA dollar, which tends to have an inverse relationship with dollar-denominated commodities like oil, lost steam Friday and was 0.1% weaker compared with a basket of 16 of its peers, according to the WSJ Dollar Index.

For now, at least, the price dips have halted a rally that pushed crude to 2019 highs this week amid supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC). The group, known as OPEC+, agreed in December to cut output by 1.2 million bpd to prevent a crude supply glut from growing.

Although crude prices have ended higher this week, rising USA crude oil production continues to worry investors that the glut of supply in the global oil market could be here to stay for longer while halting crude's upward price trajectory.

Another recent price driver has been U.S. sanctions against oil exporters Iran and Venezuela.

That means much will depend on demand, which Goldman said it expected to grow by 1.4 million bpd in 2019.

Of that, the bank said, "we could be seeing some weeks with 4.6 million bpd of gross crude exports by end-year, adding to this week's new record" of 3.6 million bpd.

Given the supply and demand picture, Goldman said "we expect $60-$65 per barrel Brent prices, on average, in 2019 and 2020".