Oil rises 1% on OPEC supply cuts

Marco Green
October 17, 2019

Oil prices rose on Wednesday, tracking gains in equities, as investors pinned hopes on a potential Brexit deal between Britain and the European Union and on signals from OPEC and its allies that further supply curbs could be possible.

Brent crude for December settlement rose 68 cents to end the session at $59.42 on the London-based ICE Futures Europe Exchange.

"Oil is starting to see some bullish positions added on the easing of two big tail risks for global demand, the U.S".

"Prices remain under pressure", said Craig Erlam, analyst at Oanda. "China trade war and Brexit seem more optimistic", said Pavel Molchanov, a Houston-based analyst at Raymond James & Associates Inc.

Last-ditch talks between Britain and the European Union to get a Brexit deal ahead of a summit of the bloc's leaders this week ran past midnight to Wednesday, but it was still unclear if Britain could avoid postponing its departure, due on October 31.

"Prices are under pressure from increasing pessimism about the global economy and subsequent demand-side concerns", Stephen Brennock of oil broker PVM said. Russia's Energy Minister Alexander Novak said last week that OPEC and its allies are now not discussing changing the terms of their agreement, while OPEC Secretary-General Mohammad Barkindo is not ruling out the possibility of a deeper cut. The Energy Information Administration will release its tally of domestic stockpiles Thursday, while the industry-funded American Petroleum Institute will provide data later Wednesday.

Analysts estimate United States crude inventories rose by around 2.8 million barrels last week.

Earlier, the International Energy Agency warned that OPEC faces a "serious challenge" if it wants to defend oil prices next year as fuel-demand growth may slow while rival crude producers expand output.

The reports have been delayed one day because of a USA government holiday.

Oil steadied below $59 a barrel on Wednesday, pressured by concerns about weaker demand for fuel due to slower economic growth and forecasts of a further rise in U.S. crude inventories.

So when they sit down at the summit in December, OPEC and its Russia-led non-OPEC partners may have to seriously consider deepening the cuts, barring another major supply disruption or unexpected optimism about oil demand growth in case trade disputes are resolved and economies pick up pace.

Other reports by Click Lancashire

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