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Oil rebounds from one-year low as US crude stockpiles drop

Nov 21 2018 13:25
Sharon Cho and Grant Smith, Bloomberg

Oil recovered from a one-year low as industry data showing a drop in US crude inventories allayed some of the concern that a new surplus is amassing in global markets.

Futures in New York rose as much as 2.4% after plunging more than 6% on Tuesday. The American Petroleum Institute was said to report a 1.55-million-barrel drop in stockpiles last week, compared with a gain forecast in a Bloomberg survey before government data due on Wednesday. US President Donald Trump said Saudi Arabia has been “very responsive” to his requests to keep prices low, calling into question OPEC’s resolve to trim supply.

Crude prices in London and New York collapsed along with equities on Tuesday amid the highest volatility since 2016. The plunge was said to be exacerbated by Wall Street banks covering their exposure to oil-producers’ hedges by selling futures. With OPEC and its allies scheduled to meet in Vienna early December to discuss output plans, the International Energy Agency warned this week that cutting supplies may have some negative implications.

“Finally, a draw in US crude stocks,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB. “If we look at next year’s oil-market balance, it should be well within OPEC’s capability to hold back supply as needed in order to manage the market.”

West Texas Intermediate for January delivery rose as much as $1.29 to $54.72 a barrel on the New York Mercantile Exchange, and was at $54.29 at 11:00 in London. The contract sank 6.6% on Tuesday to the lowest settlement since October 2017. Total volume traded was 56% above the 100-day average.

READ: Oil drop to one-year low on concern supply cuts wont stem glut

Brent for January settlement gained 1.6% to $63.50 a barrel on the London-based ICE Futures Europe exchange after closing at $62.53 on Tuesday, the lowest since December. The global benchmark crude traded at a $9.19 premium to WTI for the same month.

Trump said he won’t let the murder of journalist Jamal Khashoggi jeopardize US relations with the Saudis as oil prices may “go through the roof” if the partnership between the two nations breaks. Saudi Arabia had previously sought crude output curbs of about 1 million barrels a day, while Russia signaled the need for a “balanced decision.”

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