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Oil climbs on Asian share market recovery, OPEC-led curbs

Oil climbs on Asian share market recovery, OPEC-led curbs

Mubasher: Oil prices jumped on Wednesday as stock markets recovered, while output curbs led by the Organization of Petroleum Exporting Countries (OPEC) are set to stabilise the supply-demand balance.

Interruption at Libyan crude shipments after a militia group seized El Sharara, the country’s largest oilfield, pushed prices higher, according to traders.

By 7:57 am GMT, US Nymex crude futures rose 0.72% to $52.02 per barrel (pb), while international Brent futures climbed 0.75% to $60.65 pb.

The rising prices came amid a rally in Asian stock markets on Wednesday.

Talks with China were ongoing to resolve the trade dispute between Beijing and Washington, US President Donald Trump told Thomson Reuters on Tuesday.

In addition, supply cuts of 1.2 million barrels per day (bpd) announced by OPEC and some allied producers, including Russia, last week buoyed prices during this week.

“OPEC production curbs will stabilize the market,” ANZ bank said on Wednesday.

Despite the positive sentiment in markets on Tuesday, analysts warned against an economic downturn.

“The global economy is set to cool in 2019-20, as rising interest rates and inflation begin to limit consumption in major developed economies, and market uncertainty weakens the fundamentals in emerging markets,” the Economist Intelligence Unit (EIU) said in its latest outlook.

“The major risk to the near-term outlook relates to a faster-than-expected deterioration in economic activity,” UK bank Barclays said in its commodities outlook for the next year.

Moreover, the OPEC-led curbs would likely be “insufficient to mop up the inventories in the targeted three-month period till the end of the first quarter of 2019,” energy consultancy FGE’s chairman Fereidun Fesharaki said in a note,

Prices, as a result, are “likely to hover in the $55-$60 per barrel range for Brent, with [Nymex] sitting some $5-$10 per barrel below this given current fundamentals,” FGE said.

The supply cuts are undermined by surging production in the US, where output touched a record 11.7 million bpd.

The US is expected to end this year as the world’s largest producer, surpassing Russia and Saudi Arabia.

The US annualised full-year average output would be 10.88 million bpd, the Energy Information Administration (EIA) said on Tuesday, predicting a production increase of 1.53 million bpd for this year, and unprecedented 12.06 million bpd for the next.