OPEC Discipline Arrests Crude Oil's Fall From Three-Year High

(Bloomberg) -- Crude edged higher as OPEC showed increased determination to curb production and tighten markets.

Futures rose 0.4 percent in New York following Tuesday's decline. Strict adherence by OPEC, Russia and other major producers to self-imposed supply limits has been counterbalanced by concern that hedge fund managers may begin unwinding a record level of bullish bets on crude prices. Meanwhile, gasoline futures jumped amid U.S. refinery shutdowns because of the cold weather.

"The market continues to take support from signs that OPEC and Russia's compliance with their production cuts is really high and it doesn't seem that there are any worries that there is cheating going on yet," Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone.

Despite Tuesday's price drop, crude remains close to levels last seen in December 2014. The Organization of Petroleum Countries and allied crude producers complied with their output limits at a rate of 125 percent in December, up from 122 percent a month earlier. Discipline within the group should remain high this year, Kuwaiti Oil Minister Bakheet Al-Rashidi told reporters in Kuwait City. Citgroup Inc. said the cartel and its allies have already achieved their supply goals.

West Texas Intermediate for February delivery advanced 24 cents to settle at $63.97 a barrel on the New York Mercantile Exchange.

Brent for March settlement added 23 cents to end the session at $69.38 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.46 to March WTI.

Oman Meeting

Gasoline futures rose 1.1 percent to settle at $1.8584 a gallon, the highest level since August 31.

The OPEC-led group won't be discussing how to end output cuts when they meet this weekend in Oman despite the recent run-up in crude prices, Al-Rashidi said. "There is no plan at all to talk about any exit strategy," he said. "We are committed until the end of the year, this is the agreement."

In the U.S., the industry-funded American Petroleum Institute is scheduled to release its stockpiles data on Wednesday and the Energy Information Administration is scheduled to release its weekly inventory tally on Thursday.

U.S. crude inventories probably declined by 3.15 million barrels last week, according to the median estimate of analysts in a Bloomberg survey. Stockpiles at the Cushing, Oklahoma, pipeline hub probably fell by 2.5 million barrels last week, according to a forecast compiled by Bloomberg.

"WTI is continuing to outperform Brent as the reductions at Cushing have been really pronounced," Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida, said by telephone.

Arctic Blast

Meanwhile, a blast of Arctic air pushing deep into the South hindered refinery operations in the region, sent natural gas prices soaring and drove electricity demand in Texas to a record high. Marathon Petroleum Corp.'s refinery in Garyville, Louisiana, had a power outage early Wednesday and is working to restore normal operations. The units are said to be on circulation, heated up but unable to process anything, according to a person familiar with operations.

The rise in gasoline prices can be attributed to refinery shutdowns in the Gulf, such as at Marathon Garyville, due to the cold weather, Finlon said.

--With assistance from Ben Sharples and Grant Smith


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