Oil prices rise on USA production declines, OPEC output cuts

Oil prices rise on USA production declines, OPEC output cuts

Oil prices rise on USA production declines, OPEC output cuts

Brent for March settlement climbed 75 cents to $68.53 on the London-based ICE Futures Europe exchange.

The market has rallied in recent weeks as investors bet on an increasingly tighter market, aided by data showing declining USA stockpiles and threats to supply from major producers such as Iran and Venezuela.

The American Petroleum Institute reports its weekly inventories numbers this afternoon, followed by the government's official report tomorrow morning.

Iran said on Tuesday that OPEC members were not keen on increased prices.

OPEC is cutting output by even more than it promised and the restraint is reducing oil stocks globally, a trend most visible in the United States, the world's largest and most transparent oil market. Inventories at Cushing dipped below 50 million barrels through the week ended 29 December, the first time they have dropped below that level since February 2015, according to the most recent Energy Information Administration data.

Standard Chartered expects oil demand growth to outpace supply growth from non-OPEC countries in both 2018 and 2019, continuing to be the main supporter of prices, analysts wrote Tuesday.

A third OPEC source said market fundamentals did not justify the price rally.

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Market bulls have also been buttressed by the Organization of the Petroleum Exporting Countries' continued compliance with a deal to cut crude production.

Traders said the gains were due to a slight decline in the number of U.S. rigs drilling for new production, which eased by five in the week to January 5, to 742, according to data from oil services firm Baker Hughes.

USA crude production was forecast to climb by 970,000 barrels per day (bpd) in 2018 and rise another 580,000 bpd to 10.85 million bpd in 2019, the EIA said in a monthly report that provided the agency's first outlook for next year.

Pump jacks bring oil up from wells in North Dakota.

Oil prices firmed on Monday after a dip in the number of USA rigs drilling for new production, with crude holding just below the highs of almost three years reached last week.

Some in OPEC are anxious a prolonged rally could stimulate more USA shale oil output, however, creating more oversupply that could weigh on prices and market share. "But for now, the bullish trend remains intact as prices remain above key supports".

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