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Oil Futures Mixed on Building US Crude Stocks, Saudi Cuts
2/14 10:38 AM
Oil Futures Mixed on Building US Crude Stocks, Saudi Cuts WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures traded mixed Thursday morning amid competing factors, including a fourth consecutive weekly build in commercial crude stocks in the United States reported Wednesday by the Energy Information Administration countered by declining output from Organization of the Petroleum Exporting Countries led by a sharp drop in Saudi production. In late morning trading, NYMEX March West Texas Intermediate futures were down slightly at $53.80 bbl, with ICE Brent futures up 24cts $63.85 bbl. March ULSD contract gained 0.74cts to $1.9462, while March RBOB futures gained 1.42cts to near $1.4793 gallon. In overnight trading, oil futures were broadly supported by a 930,000 bpd drop in OPEC crude production reported by the International Energy Agency Wednesday morning. The steep decline in January production pressed total OPEC output to near a four-year low at 30.83 million bpd that led to a 1.4 million bpd decline in world oil supply during the first month of 2019. The sharp drop in OPEC oil production was driven by Saudi Arabia, where January output was down 350,000 bpd at 10.213 million bpd, as the kingdom cuts output more than its obligation under the OPEC+ agreement. On Tuesday, Saudi Energy minister Khalid al-Falih said during an interview that production would fall below 10 million bpd in March to more than 500,000 bpd below the 10.311 million bpd target agreed to in Vienna. The steep decline in Saudi Arabia's output coincides with U.S. sanctions on Venezuelan state oil company PDVSA, which threaten to remove some 330,000 bpd in supply from the market this year, according to Goldman Sachs. Some market observers do not expect these volumes to ever come back into the global market, as an implied 30% hurdle rate required to turn Venezuela's extra heavy crude oil into oil exports would be too high to accept for the struggling nation. In recent comments, Phillip Verleger, the principal at PKVerleger LLC said that Venezuela's vast oil reserves would likely become one of the first stranded oil assets of this century. Supply cuts from Saudi Arabia and curtailed exports from Venezuela allowed investors to look past a mostly bearish EIA report released Wednesday. EIA reported a 3.6 million bbl build in commercial crude stocks in the United States that lifted inventories to the highest level since November 2017 to 450.8 million bbl during the week-ended Feb. 8. It was the fourth consecutive week with an increase, with domestic crude stocks up 13.755 million bbl since mid-January. The increase came despite a drop in net crude imports to the lowest volume on record at 3.846 million bpd during the profiled week while domestic crude production at 11.9 million bpd remained at peak levels for the fifth straight week. U.S. crude output is expected to grow by 1.45 million bpd this year and by another 790,000 bpd next year to 13.0 million bpd, according to the EIA. The growth, led by U.S. shale oil output, has built up global inventories of crude and refined products. In outside markets, U.S. dollar marched upward Thursday morning to trade at a 97.12 fresh two-month high, as the U.S. economy continued to outperform economies in the Eurozone and Asia. Gross domestic product for Europe in the fourth quarter was left unchanged at an annualized 1.2% growth rate with Germany's fourth quarter GDP reported flat after 0.2% contraction in the third quarter, dodging a recession bullet. Annualized fourth quarter GDP in Germany was a lower-than-expected 0.6%. According to Germany's Federal Statistics Office annualized fourth quarter GDP in Europe's largest economy was lower-than-expected 0.6%, as industrial production has been falling at the fastest pace since the financial crisis hit by the slowing demand for its goods and a struggling car industry. Liubov Georges, 1.646.359.4088, liubov.georges@dtn.com, www.dtn.com. (c) 2019 DTN. All rights reserved.