U.S. oil benchmark dips below $50, then rallies

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November 29, 2018 12:25pm NYSE:USO

Oil Prices

From Myra P. Saefong: Oil futures climbed sharply on Thursday, bouncing back from an earlier decline that pulled the U.S. crude benchmark below $50 a barrel for the first time since October 2017.


West Texas Intermediate crude for January delivery CLF9, +2.84%  on the New York Mercantile Exchange was up $1.18, or 2.4%, at $51.47 a barrel after trading as low as $49.41 early Thursday.

Brent crude, the global benchmark, also fell to a 13-month low before bouncing, with January LCOF9, +1.87%  climbing 81 cents, or 1.4%, at $59.57 a barrel. The January contract expires at the end of Friday’s trading session.

The price bounce came after Reuters, citing unnamed industry sources, reported that Russia is increasingly convinced it needs to cut oil output alongside members of the Organization of the Petroleum Exporting Countries, though it continues to bargain with Saudi Arabia over the specifics of any coordinated reduction ahead of a meeting of OPEC members and its allies next week.

The earlier Thursday price dip had built on a Wednesday slide that followed data showing U.S. crude inventories rose for a 10th straight week and remarks by Putin, who said oil at $60 a barrel was “absolutely fine” but also that he was willing to work with Saudi Crown Prince Mohammed bin Salman toward stabilizing the market.

“Russia, the de facto leader of the non-OPEC coalition, continues to show hesitancy around direct measures to support the price of crude,” said Robbie Fraser, global commodity analyst at Schneider Electric, in a note.

Between the Group of 20 meetings in Buenos Aires starting Friday and next week’s official OPEC meeting in Vienna, “the cartel is ultimately expected to target between 0.5-1.5 [million barrels per day] of supply that could halt the steady run of inventory builds seen in the last several months,” said Fraser.

The earlier Thursday price dip had built on a Wednesday slide that followed data showing U.S. crude inventories rose for a 10th straight week and remarks by Putin, who said oil at $60 a barrel was “absolutely fine” but also that he was willing to work with Saudi Crown Prince Mohammed bin Salman toward stabilizing the market.

“Since late summer, U.S. oil inventories have been rising the most compared to the past five years and the North American market looks amply supplied,” said Norbert Ruecker, head of macro and commodity research at Julius Baer, in a note. “Even the early and swift ramp-up of refinery activity from the usual autumn maintenance season could not prevent crude oil inventories from continued swelling.”

Meanwhile, Putin and bin Salman are expected to meet on the fringes of the Group of 20 summit in Buenos Aires that begins Friday and are likely to attempt to find common ground on production ahead of the meeting of OPEC members and its allies next week, said Eugen Weinberg, head of commodity research at Commerzbank, in a note.

But if no deal is reached, “prices risk falling further next week,” he said. The comments by Putin about $60 oil added to doubts about the ability of the OPEC-plus meeting to produce an agreement on a cut, while the Saudis have insisted they won’t bear the cuts alone, Weinberg noted.

Analysts at Vienna-based JBC Energy said they have reservations “about the likelihood of a 2016-style cooperation this time around, though the Russian position will undoubtedly be crucial. Vladimir Putin’s message on oil yesterday was somewhat ambiguous.”

In other energy trading, December gasoline RBZ8, +3.93%  rose 3% to $1.440 a gallon, while December heating-oil futures HOZ8, +0.31%  rose less than 0.05% to $1.839 a gallon. The December contracts expire at Friday’s settlement.

Natural-gas futures, meanwhile, extended earlier declines after the Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 59 billion cubic feet for the week ended Nov. 23. Analysts polled by S&P Global Platts had forecast a decline of 73 billion cubic feet, on average.

January natural gas NGF19, -3.06%  slumped 4.6% to $4.484 per million British thermal units.


The United States Oil Fund LP (USO) was trading at $10.93 per share on Thursday afternoon, up $0.27 (+2.53%). Year-to-date, USO has declined -8.99%, versus a 3.00% rise in the benchmark S&P 500 index during the same period.

USO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 108 ETFs in the Commodity ETFs category.


This article is brought to you courtesy of MarketWatch.


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