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Oil score back-to-back session gains Tuesday as signs of supply crunch linger

Por Myra P. Saefong / MarketWatch

Petroleumworld 03 12 2019

Crude-oil futures settled higher for a second straight session on Tuesday, giving up an earlier move toward 2019 highs.

Signs of a supply crunch lingered and traders assessed the latest monthly U.S. government price and output forecasts and allowed recent comments from energy officials to hold.

Prices were briefly poised to settle at their highest since November, on the back of tightening Venezuelan supplies and signs that OPEC would continue cutting output into the second half of the year.

News that the Organization of the Petroleum Exporting Countries is “looking at more [output] cuts in the near-term took us higher late last Friday” and into Tuesday morning, said John Caruso, senior market strategist at RJO Futures.

However, “I think you've got some profits being booked” ahead of the supply reports from the American Petroleum Institute late Tuesday and Energy Information Administration early Wednesday, he said. For WTI, there's “strong overhead resistance” at $57.90.

April West Texas Intermediate crude CLJ9, +0.23%  rose 8 cents, or 0.1%, to settle at $56.87 a barrel on the New York Mercantile Exchange on Tuesday after trading as high as $57.55.

There was a brief delay to some energy futures price settlements on Nymex Tuesday, with Matt Stroud, a CME Group spokesman, citing “a technical issue.”

Global benchmark May Brent crude LCOK9, +0.18% gained 9 cents, or 0.1%, to $66.67 a barrel on ICE Futures Europe, following a high at $67.39.

Time Crude Oil Apr 2019 14 Jan 28 Jan 11 Feb 25 Feb 11 Mar US:CLJ9 $45.0 $47.5 $50.0 $52.5 $55.0 $57.5 $60.0

The EIA trimmed its forecasts for U.S. crude production for this year and next and lifted its 2019 forecasts for U.S. and global benchmark oil prices, according to its Short-term Energy Outlook report released Tuesday.

“This month's forecast for U.S. crude oil production in 2019 and 2020 decreased, but both years are still on track for new production records,” said Linda Capuano, EIA administrator, in a statement. For 2020, the EIA cut its U.S. oil output forecast by 1.3% to 13.03 million barrels a day.

“The March forecast expects the United States to become a net exporter of crude oil and petroleum products in 2020,” she added.

In reaction, Fawad Razaqzada, market analyst at Forex.com, said that although the “EIA did reduce its estimate on U.S. oil output, this was offset by the fact it also trimmed its world oil demand forecast,” so “I don't think EIA's latest projections will cause a material shift in the trend.”

A report from the International Energy Agency released Monday said the U.S. would lead the world's growth in output over the next five years.

On the sidelines of the annual CERAWeek energy conference in Houston, Mohammad Barkindo, OPEC's secretary-general said Tuesday that U.S. President Donald Trump's tweets on oil prices was “one of the new additions to the list of uncertainties” facing the oil market, according to the Financial Times .

Meanwhile, a power blackout has stalled oil shipments from crisis-stricken Venezuela amid economic and political turmoil. “Venezuela's oil exports are under pressure in any case due to the U.S. sanctions against the state oil company PdVSA,” said Commerzbank in a Tuesday note.

Annual figures from the IEA indicate that the country's crude output is expected to fall from 1.3 million barrels a day in 2018 to 750,000 barrels a day in 2019, as U.S. sanctions on Venezuela remain in place.

On Monday, oil futures rallied after Saudi Energy Minister Khalid al-Falih told Reuters on Sunday that it would be too early to change a production curb pact agreed by OPEC and its allies, which includes Russia, another major producer, before June.

The OPEC/non-OPEC Joint Ministerial Monitoring Committee, or JMMC, which monitors compliance with output reductions, is scheduled to meet in Azerbaijan on March 18. OPEC's next scheduled meeting will be held on April 17-18.

Monthly oil reports are also due from OPEC on Thursday and the IEA on Friday.

Separately, the EIA will issue its weekly petroleum supply data early Wednesday, with the API reporting its own figures late Tuesday. Analysts polled by S&P Platts expect the report to show, on average, a rise of 3.3 million cubic feet in crude stockpiles for the week ended March 8. They also forecast supply declines of 3.5 million barrels for gasoline and 2.5 million barrels for distillates, which include heating oil.

On Nymex Tuesday, April gasoline RBJ9, -0.53%  ended at $1.816 a gallon, down 0.6%, while April heating oil HOJ9, -0.44%  lost 0.4% to $1.986 a gallon. April natural gas NGJ19, +0.79%  rose 0.4% to $2.784 per million British thermal units.

Sarah McFarlane contributed to this article


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