Oil Up as US Crude Stockpiles Seen Shrinking

(Bloomberg) -- Oil traded above $60 a barrel ahead of U.S. government data forecast to show crude stockpiles shrank, while Iraq trimmed output as Saudi Arabia applied pressure on nations to better comply with cuts.

Futures were steady in New York after adding 0.1% on Monday. American crude stockpiles fell by 1.7 million barrels last week, according to a Bloomberg survey before Energy Information Administration data on Friday. U.S. industry figures are due later Tuesday. Iraq pared output by 110,000 barrels a day in December, according to Petro-Logistics SA.

Oil has rallied about 10% this month after the U.S. and China made a breakthrough on trade and the Organization of Petroleum Exporting Countries and its partners including Russia agreed to deepen output cuts. American crude inventories are shrinking even as the nation pumps near record levels and shale explorers boost drilling.

“Prices are rising but the market is monitoring data on U.S. oil production and inventories,” Jun Inoue, senior economist at Mizuho Research Institute, said by email. Crude has been bolstered by the OPEC+ decision to cut production further and the progress of trade talks between the U.S. and China, he said.

West Texas Intermediate for February delivery rose 5 cents to $60.57 a barrel as of 7:28 a.m. London time on the New York Mercantile Exchange. The contract added 8 cents to close at $60.52 on Monday.

Brent for February settlement rose 12 cents to $66.51 a barrel on the ICE Futures Europe Exchange. The contract gained 25 cents to close at $66.39 on Monday. The global benchmark traded at a $5.93 premium to WTI.

U.S. crude stockpiles are set to drop for a second week, extending a decline from the highest level in four months. Separately, Saudi Arabia’s pressure on fellow OPEC nations to do a better job of cutting output is prompting Iraq to reduce supplies to honor some of its outstanding commitments, according to data from Petro-Logistics and Genscape.

Oil prices are likely to remain in check during 2020 as OPEC+ production cuts are offset by higher output from other countries and a mixed outlook for demand, according to analysts. Mizuho’s Inoue estimates WTI will range from $55 to $65 a barrel next year, while Goldman Sachs Group Inc. increased its forecast for Brent to $63 from $60.

To contact the reporter on this story:
Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Ben Sharples