Energy
0

Brent, WTI Rise in Expectation of Aramco Supply Cut

Brent, WTI Rise in Expectation of Aramco Supply CutBrent, WTI Rise in Expectation of Aramco Supply Cut

Oil futures rose on Wednesday after Reuters reported Saudi Arabia would cut supplies to the region as OPEC tries to counter rising US output that is threatening to derail its attempts to end a sustained global crude glut.

Global benchmark Brent futures were up 19 cents, or 0.4%, at $48.92 a barrel. They fell 1.2% on Tuesday. US West Texas Intermediate crude was up 23 cents, or 0.5%, at $46.11 a barrel, CNBC reported.

Oil was also supported by a larger than expected fall in US crude inventories last week, down 5.8 million barrels compared with analysts' expectations for a 1.8 million barrels decline, according to industry group the American Petroleum Institute.

State-owned Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels in June, a source told Reuters, as part of OPEC's agreement to reduce production and as it trims exports to meet rising domestic power demand over summer.

Seven million barrels is roughly two days of oil imports into Japan, the world's fourth biggest importer. Aramco had previously been maintaining supplies to its important Asian customers.

"The Saudis are largely about Asian customers, so if they are trimming sales that is supportive at the margins," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

WTI fell 1.2% in the previous session, and the closing price for both contracts on Tuesday was the second lowest since Nov. 29, the day before the Organization of Petroleum Exporting Countries agreed to cut production during the first half of 2017.

Prices surged immediately after the agreement, but have come under sustained pressure in recent weeks as US production has ramped up and pushed back the expected timing for when the oil market will come into balance.

"Chief among the oil market's worries is that the renewed rise in US oil production is reducing the speed at which the supply surplus is being eroded," Fawad Razaqzada, market analyst at Forex.com, said in a note.

Add new comment

Read our comment policy before posting your viewpoints

Financialtribune.com