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Oil gains as Chinese factory data boosts commodities

14 March 2018, 08:48 | Devin Moran

Pic ReutersLONDON

Pic Reuters

Oil halted recent losses as investors weighed a potential increase in geopolitical tensions from the fallout of Rex Tillerson's ouster as USA secretary of state. That compared with analysts' expectations for an increase of 2 million barrels.

According to the Weekly Petroleum Status Report by the EIA, U.S. commercial crude oil inventories of the week ending March 9 increased by five million barrels from the previous week.

Chinese oil production fell 1.9 percent in January and February to a daily rate of around 3.77 million barrels per day, while the amount of crude processed by refineries rose 7.3 percent to 93.4 million bpd, implying that its import demand will remain strong.

Over a year after the agreement was reached, the world's biggest oil-producing countries believe that a global oversupply of oil is still weighing down prices. The S&P Global Platts survey forecast supply declines of 500,000 barrels for gasoline and 1.6 million barrels for distillates. "We continue to just chop around here", said Gene McGillian, manager of market research at Tradition Energy.

Moody's Investors Service today raised its medium-term price band for crude oil to United States dollars 45-65 per barrel from USD 40-60 as continued OPEC-led production restraint and strong global demand growth have contributed to declining global inventories, offsetting rapid increases in U.S. shale production. Gasoline futures surged 1% as stockpiles sank the most since September.

The EIA's report Wednesday showed that total US crude output edged up by 12,000 barrels to 10.381 million barrels a day last week.

"We are now only two to four weeks away from when weekly oil inventory data will start to draw again which should be supportive for oil prices", SEB commodities strategist Bjarne Schieldrop said.




"With the tug of war between the USA and OPEC the soap opera continues", said Scott Gecas, senior strategic account executive at Long Leaf Trading Group.

Cartel members' production went down 77,000 bpd from January to February, the report said, citing secondary sources.

Copper CMCU3 and palladium XPD= , a key component in gasoline-powered vehicles, both rose around 1 percent, which in turn encouraged a bounce in the oil price.

Weekly US crude production figures will be published by the Energy Information Administration (EIA) later on Wednesday.

If sanctions are reinstated, Iran's oil exports could drop by 250 000 to 500 000 barrels a day by the end of this year, FGE said in a note.

USA production growth is still expected at 2.7 percent in 2018, up from 2.3 percent in 2017.



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