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U.S. oil prices up an 8th session Wednesday to score highest finish since mid-December

By Myra P. Saefong / MarketWatch

Petroleumworld 01 09 2019

Oil futures rallied Wednesday, with the U.S. benchmark up an eighth session in a row to finish at its highest in nearly four weeks, on continued optimism over U.S.-China trade talks, a December output drop from major producers, and a weekly decline in domestic inventories.

“Support for oil comes from the Saudis cutting exports more than called for by the OPEC+ agreement and prospects of a trade agreement with China,” said James Williams, energy economist at WTRG Economics. “A trade agreement would help the Chinese economy and increase demand for oil.”

Saudi Arabia's energy minister Khalid al-Falih vowed to “stabilise” the oil market and said the agreement between the Organization of the Petroleum Exporting Countries and its allies to cut production is already starting to show results, the Financial Times reported Wednesday .

OPEC oil production fell by 630,000 barrels a day to a six-month low of 32.43 million barrels in December, according to an S&P Global Platts survey released Tuesday.

West Texas Intermediate crude for February delivery CLG9, +4.78%  rose $2.58, or 5.2%, to settle at $52.36 a barrel, for the highest finish since Dec. 13. Prices have now climbed out of a bear market, rising by 23% from its 52-week low of $42.53 on Dec. 24, according to Dow Jones Market Data.

March Brent crude LCOH9, +4.43%  rose $2.72, or 4.6%, to $61.44 a barrel, with prices for the most-active contract also poised for the highest finish since mid-December.

The positive finish extended the winning streak for both U.S. and global benchmark crude to eight sessions, the longest in about 18 months.

“Oil has yet to have a losing session in 2019, and the near-term path of least resistance is still higher based on momentum and near-term technicals,” said analysts at the Sevens Report. “However, the longer-term outlook is still unclear as production/export cuts won't be enough to curb another bout of broad market volatility based on peak earnings concerns (if Q4 reporting season underwhelms) and economic growth doesn't show signs of picking up.”

Read: Oil prices are on the verge of busting above a bullish line in the sand—exiting bear market

U.S.-China trade talks concluded Wednesday after being extended to a third day. Global stocks rose, with U.S. equities moving higher on Wall Street, and Bloomberg reporting that President Donald Trump is eager to complete a deal on the expectation that it would boost financial markets battered in part due to fears surrounding the trade battle.

Analysts at Commerzbank said trade-related optimism was also lifting crude, noting that the slump in oil prices at the end of 2018 “was driven not only by the oversupply, but also by the selloff on the stock markets. This was due to fears that the trade conflict will slow economic growth in the U.S. and China, ultimately also dampening oil demand in the two leading oil consumer countries.”

Read: Here's how closely the stock market and oil prices are tracking each other

Contributing to a positive tone, the Energy Information Administration reported Wednesday that domestic crude supplies fell by 1.7 million barrels for the week ended Jan. 4. That was bigger than the fall of 1.4 million barrels expected by analysts polled by S&P Global Platts, but significantly less than the 6.1 million-barrel drop reported by the American Petroleum Institute on Tuesday .

Product stockpiles also climbed by more than double what the market expected. Gasoline stockpiles climbed by 8.1 million barrels last week, while distillate stockpiles rose by 10.6 million barrels, according to the EIA. The S&P Global Platts survey had shown expectations for supply increases of 4.2 million barrels for gasoline and 4.3 million barrels in distillates.

On Nymex, however, futures prices for the products followed oil higher. February gasoline RBG9, +4.69%  rose 4.6% to $1.425 a gallon, while February heating oil HOG9, +2.97%  added 2.9% to $1.881 a gallon.

March natural gas NGH19, +0.49%  added 0.6% to $2.984 per million British thermal units after rising 0.8% a day earlier. Traders awaited a weekly EIA update on U.S. supplies of the commodity due Thursday. The report is expected to show a weekly decline of 84 billion cubic feet, according to a S&P Global Platts survey of analysts.



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Reporting by Myra P. Saefong from MarketWatch.

01 09 2019 20:14 GMT

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