Oil Prices Advance on Iraq Revelation
West Texas Intermediate (WTI) and Brent crude oil prices posted solid gains Wednesday on reports that OPEC member Iraq wants the cartel to raise existing production cuts.
“Petroleum markets continue to move back-and-forth remaining in their congestion ranges based upon the latest ‘news of the day,’ whether it be about the U.S.-China trade issues or the expectations regarding the upcoming OPEC+ meeting,” said Steve Blair, senior account executive with the RCG Division of Marex Spectron.
The WTI for January delivery gained $2.33 Wednesday, settling at $58.43 per barrel. The benchmark peaked at $58.66 and bottomed out at $56.28.
“January WTI today reacted to the Iraq oil minister’s remarks that they, along with some other OPEC nations, are going to propose a 400,000-barrel per day (bpd) increase in the production cuts to 1.6 million bpd,” said Blair. “The Saudis want the cuts to remain in place but be extended until mid-2020 while the Russians question whether that extension needs to be done at this time.”
A Bloomberg article posted to Rigzone earlier Wednesday highlights the apparent lack of consensus among OPEC+ members regarding whether to raise curbs on oil output.
Blair pointed out January WTI was near the highs and major resistance at $58.72 as of approximately 2:45 p.m. Eastern time Wednesday.
Also posting a solid gain during midweek trading was February Brent, which added $2.18 to end the day at an even $63 per barrel. Blair noted that further resistance for Brent appears at the $63.95 and $64.11 levels.
Like crude oil, reformulated gasoline (RBOB) finished the day higher. January RBOB settled at $1.60 per gallon, reflecting a four-cent increase. Despite Wednesday’s gain, however, Blair commented on signs of weakness with RBOB.
“Gasoline continues to linger as the ‘dog’ in the petroleum sector as gasoline stocks continue to build as we move into heating season in the U.S. and out of gasoline season, although demand could change as we approach the holidays later this month,” he said. “Gasoline stocks in the U.S. remain above year-ago levels. Gas crack spreads basically collapsed over the last three to four trading sessions, with the January crack spread falling from a high of $12.63 last Friday to current levels that are just above the $9 area.”
Henry Hub natural gas, however, erased a portion of Tuesday’s nearly five-percent gain. January gas futures shed four cents Wednesday, settling at $2.40.
“Natural gas has had its own precipitous price decline over the last week of trading once the cold snap seen in most of the Lower 48 moved toward and out of the eastern sections of the country,” said Blair.
Blair observed that gas prices seen as high as $2.689 on Nov. 25 fell to a low of $2.253 on Nov. 29 as weather moderated.
“The managed money sector continued to get shorter on the price decline, but some shorts probably covered when prices hit major support levels and weather forecasts yesterday started to show a return to colder weather by the middle of the month,” Blair concluded.
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